According to the National Center for Education Statistics, 46% of students enrolled in all degree-granting schools had student loans in 2016. This statistic shows a rise from 40% in 2000. Over the past decades, more students have taken on more debt to pay for school, and the size of their debt has grown as the years passed. The quest for post-secondary school education in the USA represents a general quest for access into, at least, the middle-class security status in the society, as the earnings of a high school diploma holder are much lesser than that of a college graduate. But painfully, it comes at a high price. The student loan system was designed to provide greater access to higher education and fill gaps in students’ ability to pay for education in America, but this has turned into a burgeoning crisis for an increasing number of borrowers.
According to a recent memorandum released by the US House of Representative Committee on Financial Services, student loan defaulters have increased and loan servicers must be held accountable. Laura Sullivan and her colleagues further explain that there is an unfair racial imbalance characterizing the distribution of student loans. Their study reveals that black students and other students of color are more often bedeviled by high debt nightmare than white students. It as if the system has a predatory design that is targeted at the minority by race and ethnicity. Available data shows that white students finish off their debt quite early, unlike blacks – having lesser or no family support – who continue to cringe under the burden for many years on. They take out more loans, amass greater debts, and experience greater difficulty in paying off these loans. Needless to say, there are underlying social factors that are left out – and need to be addressed – in disbursing loans to these students.
This Socio-Economic inequality reflects the systematic failure of the student loan system. Black students borrowed 3 times more than white students, according to a study conducted by the National Center for Education Statistics (NCES). The focus was on a cohort of students starting college in 1995-1996 and followed for 20 years. Surprisingly, 20 years after starting school, the typical black borrower still owed about $17,500 morethan their white peers. Thus, the financial assistance meant to alleviate the pain of affording tertiary education turned instead to become a paralysis affecting the economically vulnerable students of color for years, leading to frequent loan defaults. So far, the student debt crises loom with the potential for unfavorable economic impact and have caught the attention of policymakers. If not stemmed in time, probabilities are that it will cascade to other aspects of the economy, with unhealthy effects. What then is the way forward? The paradigm needs to be changed. We need to create a more inclusive student loan system that does not leave the minorities preyed on. The review process ideally should involve stakeholders in government and lending institutions in the USA.
References
- National Center for Education Statistics (2018), Table 331.20. Digest of Education Statistics. Retrieved from https://nces.ed.gov/programs/digest/d18/tables/dt18_331.20.asp?current=yes
- Seth Frotman, Persis Yu, Ashley Harrington, Hasan Minhaj, and Jason Delisle. (2019), A $1.5 Trillion Crisis: Protecting Student Borrowers and Holding Student Loan Servicers Accountable. Pg. 1-5.
- Laura Sullivan, Tatjana Meschede, Thomas Shapiro, and Fernanda Escobar (2019), Stalling dreams: How student loans are disrupting life chances and widening racial gap. The Heller School for social policy and management. Pg. 1-19.
- Jennifer S. Wine, Ruth E. Heuler, Sara C. Wheeless, Talbric l. Francis, Jeff w. Franklin, and Kristin M. Dudley (2002), Beginning postsecondary students longitudinal study: 1996-2001 (BPS: 1996/2001) methodological report. National Center for Education Statistics, US Department of Education, Office of Educational Research and Improvement. NCES 2002-171.