Student Loan Debt Prevents Wealth-Building for HBCU Students
Credit: Anna Moneymaker/Staff / Getty Images News- HBCU students are nearly twice as likely as non-HBCU students to take out federal loans.
- In 2017, 60% of HBCU graduates took a less desirable job outside their field of study to make payments toward their student debt.
- The homeownership rate among HBCU graduates is 16 percentage points lower than for non-HBCU graduates.
Historically Black colleges and universities (HBCUs) have opened up opportunities in higher education and beyond for Black Americans since the early 1800s. But student debt is still holding these graduates back from achieving equity with their counterparts from other institutions.
A new report from the Center for Responsible Lending (CRL) found that a significant number of HBCU graduates have taken less desirable jobs, avoided pursuing additional education, and delayed buying a home due to student debt.
The majority of HBCU students (60%) have an expected family contribution of $0, meaning they will most likely have no financial assistance for their education from their family based on their assets and income. An even larger percentage of HBCU students (70%) are Pell Grant recipients, compared to just 32% of non-HBCU students.
On average, HBCU students receive $3,000 less in institutional aid than non-HBCU students, but they’re nearly twice as likely to take out federal loans (63% vs. 33%).
These students will additionally borrow an average of 19% more in loans than students from other institutions.
Source: CRL
Because of the significant debt HBCU graduates incur, their ability to build wealth becomes stunted.
In 2022, the rate of homeownership among Black households was 45% compared to 75% for white households. As of 2017, HBCU graduates had a homeownership rate that was 16 percentage points lower than non-HBCU graduates. And in 2019, the median white family had eight times the wealth of the median Black family.
During all these periods, Black families and households held more debt than white ones.
Source: CRL
The student loan payment pause that began during the pandemic did provide some significant short-term debt relief to HBCU borrowers.
An August 2022 Morning Consult poll commissioned by CRL found that 85% of these borrowers were able to make at least one wealth-promoting financial choice because of the payment pause. On average, they had an additional $310 a month in their bank account.
But as the payment pause comes to close in just a few months, HBCU borrowers will once again face a hit to their ability to build wealth.
Three out of five borrowers said they expect to face difficulties when payments resume. And more than a third of these borrowers struggled to make payments even prior to the pause.
While there is no simple solution to aiding HBCU borrowers in building wealth and eliminating student debt, CRL recommends that the state tax be waived on student loan cancellation, limitations be set for collections, maximum Pell Grants be doubled, and investments in HBCUs increase.