The student loan default crisis is bad… and getting worse, finds Judith Scott-Clayton, a Brookings Institution scholar, based on her analysis of the latest student loan data released by the U.S. Department of Education.
Debt and default has reached “crisis” levels among African-Americans, and even a bachelor’s degree is no guarantee of security. Black B.A. graduates default at five times the rate of white B.A. graduates (21 versus 4 percent). Black graduates are even more likely to default than white dropouts.
Trends are most alarming among for-profit colleges, says the report, “The looming student loan crisis is worse than we thought.” The results, Scott-Clayton argues, justify robust efforts to regulate the for-profit sector, improve degree attainment, and promote income-contingent loan repayment options.
Remarkably, the conclusion that I find most obvious eludes Scott-Clayton: Student loans are handed out so indiscriminately, in such disregard to a student’s academic potential or prospects of repayment, that a program designed to promote social mobility for the poor and minorities has exploded like a Loonie Toons cigar. Student loans have become a instrument of immiseration for the very people they were designed to assist.
While the author’s public policy musings are debatable, her presentation of the data is useful. Rather than looking at the entire body of student borrowers, she tracks the fate of different student “entry cohorts” — those who entered postsecondary school in 1996 and and 2004 — and tracked them 12 years and 20 years after entry.
In this chart, we can see what happened to people who entered college in 2004 twelve years later. Despite significant financial assistance for lower-income students available at every four-year college and university, African-Americans racked up more than $21,000 in undergraduate debt on average. Total amount borrowed, which includes graduate school debt, was nearly $56,000. In contrast to other racial/ethnic groups, which managed to pay down some of the debt twelve years after entering college, African-Americans saw average debt loads increase — to $64,000. More than one in five blacks were in default, compared to one in twenty-five whites.
It fascinates me how social scientists such as Scott-Clayton obsess over the black-white differential. As the data clearly shows, Asians have the lowest default rate of any racial/ethnic group. Why aren’t Asians the standard for comparison? Why isn’t the disparity described as an Asian-black disparity and an Asian-white disparity? Because, I suspect, emphasizing the gap between whites and blacks reinforces the “white privilege” narrative, while framing the gap as between Asians and other groups would undermine the narrative. “Asian privilege” just doesn’t have the same ring to it.
One thing seems undeniable, though: There is a student loan crisis among African-Americans. Scott-Clayton does her best to explain this crisis as the fault of for-profit institutions, which, in a narrow sense it is. But her analysis ignores a couple of things. First, there is considerable variability between for-profit institutions. Some are fly-by-night, others do a pretty good job of graduating their students and placing them in jobs. Second, there is considerable variability among non-profit colleges. Historically black colleges and universities have student loan profiles comparable to that of many for-profits.
The real problem runs much deeper. There is a widespread belief in America that everyone has a right to attend college and that the federal government should help make that education accessible by means of student loans. Moreover, there is an assumption that student lending programs should not “discriminate” against students on the basis of academic preparation, family financial resources, or other factors predicting the applicant’s likelihood of graduating and repaying their loans the grounds that blacks and minorities would be negatively impacted.
As these beliefs and assumptions play out in the real world, millions of African-Americans are winding up in financial peonage. As blacks accumulate loans that cannot be discharged, they ruin their credit scores, impair their net worth, ramp up their debt-to-asset ratios, and, as we have seen in a recent post (“Racism, Racism, Everywhere You Look,”), find that their home mortgage loans are rejected at a higher rate than whites.
But some people are incapable of peering past the paradigm of omnipresent racism. So scholars like Scott-Clayton try to frame the issue as for-profit colleges, and investigative reporters compile data purporting to show discrimination in mortgage lending without accounting for credit scores and debt-to-asset ratios. Thus, apologists for the status quo perpetuate policies that entrap African-Americans in poverty.
Leave a Reply
You must be logged in to post a comment.