Stunning Study Shows Black College Grads More Likely To Default On Student Debt Than White Dropouts – But Employers Definitely Aren’t Racist

We’ve written voluminously about America’s worsening student debt crisis.

It’s a tough subject to broach because personal responsibility demands that people repay what they borrowed. But between soaring tuition costs (enabled in part by the ease with which students can obtain loans that are effectively underwritten by the U.S. taxpayer) and the fact that increasingly, the skills cultivated in undergraduate and graduate programs are disconnected from those employers apparently value, the prospect of repayment is becoming so far-fetched for some borrowers that forgiveness may be the only feasible option if we want to avoid a scenario wherein the student debt albatross ends up crippling the U.S. economy.

For context, here’s a snapshot of tuition inflation:

And here’s a rather poignant visual that shows how enormous the burden truly is (the outstanding stock of student debt in America is now larger than the entire USD high yield market):

This is already affecting homeownership and it seems entirely likely that before it’s all over, it will show up in all manner of high level econ data if something isn’t done to ameliorate the situation.

(Wells Fargo)

Again, we’re inclined to say that all of this debt should not in fact be forgiven, especially when it was incurred by folks who enrolled in reputable institutions.

Obviously, for-profit fraud (like the kind that the President himself perpetrated through “Trump U.” only to end up paying out a $25 million settlement to thousands of students earlier this year) is an entirely different story. That debt should be forgiven no questions asked. But whatever you want to say about the supposed disconnect between the labor market and the skills being taught at reputable colleges and universities, someone who takes their education seriously should probably be able to figure out a way to use the skills they attain to make a living.

But wait. It turns out there’s another caveat. A new study from Brookings details a rather alarming set of statistics derived from new data on student debt and repayment, released by the U.S. Department of Education in October 2017.

As it turns out, the student debt crisis for African Americans is particularly acute. Indeed, the numbers are so alarming that one can’t help but wonder if maybe prospective employers might be … oh, I don’t know … racists? 

You can read excerpts from the Brookings report below and decide for yourself. While we would note that there are of course all manner of plausible explanations for this rather desperate state of affairs, you’d be obtuse if you didn’t at least acknowledge the possibility that the problem boils down to systemic oppression of African Americans in the labor force.

Via Brookings

THE SPECIAL CASE OF BLACK BA GRADUATES

Unlike for other demographic groups, for black students the debt crisis is not limited to dropouts and for-profit entrants. In a previous Brookings report (October 2016), co-author Jing Li and I highlight the black-white gap in student loan debt among bachelor’s degree (BA) graduates, and show how the gap widens in the four years following graduation.^[9]

The newly released data tracking entrants for 12 years allow the tracking of BA graduates for an even longer follow-up (for the vast majority who take less than 8 years to complete their BA), and produce even more alarming results. While our previous report found that the black-white gap in total debt tripled after graduation, Table 3 below shows that with longer follow up the gap more than quadruples, from $10,301 at graduation to $43,372 at the end of the 12-year follow-up. The increasing gap over time is due both to higher levels of graduate school borrowing among black BA completers, as well as lower rates of repayment.

While BA completers as a whole default at a low rate (of just six out of every 100, see Table 2), the default rate among black graduates is more than five times the rate of white graduates (21 versus 4 percent). In fact, a black BA graduate is more likely to default than a white college dropout (21 versus 18, not shown).

The outcomes of black BA graduates cannot be explained solely by lower levels of parental income or education. The default rate of black graduates is significantly higher than the default rate for first generation, low-income graduates (13 percent, not shown in table). Scott-Clayton and Li (2016) provide evidence that poorer labor market outcomes and for-profit enrollment at the graduate level contribute to high rates of default among black college graduates.