About one in every seven Americans describe themselves as African American, thus making them the third-largest race or ethnic group in the United States of America.
Since the adoption of the Civil rights legislation in 1964, African Americans have made considerable social and economic advances. The African American community still faces immense challenges, however. Economic indicators show shocking inequities — People of color lag well behind the majority of the white population by most of the significant social well-being indicators
The Plethora of Student Debt Crisis
The idea of student loans was proposed to support aspiring people to pursue good quality education and eventually secure better employment opportunities, which, in reality, is not the case.
In terms of educational attainment, African Americans lag well behind the white students. Individuals with higher education like a college degree tend to earn more than those without post-high school education and thus have better employment prospects. People of color, however, are less likely to acquire higher education and secure a college degree than white students.
Statistics claim that African American Students face the hardest hit in the student debt crisis. African American students are known to borrow more than students belonging to other races do. Stats show that approximate 87% of African American students opted for student loans whereas only 60% of white and 65% of Latino students went for it.
African American students are more likely to default on their loan payments than other racial counterparts, which can result in a long-lasting blow on credit scores. Roughly, 50% of all students of color enrolled in 2003-2004 failed to secure even one loan over the following 12 years, in comparison to 1 in 5 white students who successfully did, during the same timeframe.
Statistics show that Black students owe significantly more than white students. Black students owe $7400 more on average than a white student after a bachelor’s degree.
The history associated with racism and slavery in the African American Community continues to affect their economic growth as a community. The institute of policy studies claims that it will take around 228 years to close the gap in racial wealth. The American Dream of eradication of racism, better education system, and equal job opportunities doesn’t seem to be coming true any time soon.
According to the Economic Policy Institute, cultural and employment disparities have resulted in less personal wealth and savings — among African American communities compared to white households. White families had an average wealth of $134,230 in a study conducted in 2013 higher than the average of $11,030 for African American families. This indicates there are lesser out-of-pocket assets for black students to pay for their tuition fees, leading to even more loans.
The issue of how black students carry the burden of the student loan was escalated on a national platform during the Presidential primary race of 2020. Many candidates asked for greater funding for historically African American colleges along with public universities to reduce the need for borrowing altogether. While US Presidential Candidate Sen. Elizabeth Warren said that 80% of borrowers of color will gain from her debt cancellation plan. Bernie Sanders, on the other hand, has proposed to eliminate student debt entirely.
However, Kamala Harris proposed a plan of wiping the debt for entrepreneurs belonging to underrepresented sections of the population. Her proposition has received a lot of criticism because of the conditions needed to qualify for the initiative. This is part of her larger initiative to bridge the racial wealth gap.
What one can do to avoid default
Here’s how experts suggest the borrowers can curb default:
- You can apply for FAFSA, the Free Application for Federal Student Aid, to gain access to numerous scholarships, work-study options, and Pell Grants. There is also a good number of merit and need-based scholarships designated for students of color.
- Private Student loans may seem attractive but carry higher interest rates as compared to federal loans. Private loans also come with more strict repayment options and lesser opportunities for forgiveness.
- Once you miss the payment, it initiates a 270-day countdown leading to default finally. Once you become a defaulter, you can no longer opt for forbearance or a new plan for repayment. But you can rely on your debt servicer to get you out of your default.
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