Written by: Mike Senecal
Edited by: Lillian Guevara-Castro
Reviewed by: Ashley Fricker
Unlike many developed countries, the United States asks higher education students to pay tuition. That naturally creates disparities between people with resources to afford school and those who require financial assistance to achieve their potential.
Wealth inequality impacts prospects for higher education on racial and ethnic lines. On average, Black families own about 24 cents for every $1 of white family wealth and Hispanic families only 19 cents for every $1 of white family wealth, on average.1
It stands to reason that race helps determine how society distributes the student loan debt burden. Pursuing higher education is a hallmark of the American Dream. Here, we explore the intersection of student loan debt with race and ethnicity in America.
African American Bachelor’s Degree Recipients Owe the Most Cumulative Debt at $37,230
Rising college costs and student debt burdens go together. The average annual tuition and required fees at a four-year institution grew from $14,596 in 2010-11 to $19,806 in 2021-22 — that’s almost $80,000 for four years of school.2 Individuals collectively held more than $1.72 trillion in federal and private student loan debt as of Q4 2023.3
Lower-income families have fewer resources available to send children to college. The figures above for African American and Hispanic family wealth relative to $1 of white family wealth translate to white families holding about $1.25 million of total household wealth on average, Black families holding about $294,000, and Hispanic families holding about $240,000.
Although white households represent only 66.3% of total households, they hold 84.5%of total family wealth, 29% more than their representation would suggest if wealth were distributed equitably according to race.4
On average, African American students who earned associate and bachelor’s degrees owed $24,840 and $37,230, respectively, upon college completion in 2019-2020. Contrast those figures with overall averages of $20,740 for associate’s degree recipients and $33,440 for bachelor’s degree recipients during the same period.5
| Racial/ethnic group | Total student loan debt |
|---|---|
| African American | $37,230 |
| White | $33,680 |
| Asian | $33,400 |
| Multiracial | $33,350 |
| Hispanic | $29,620 |
White Students Owe the Least Student Loan Debt Relative to Median Household Worth
Other data shows that, even though gross differences in total debt according to race may appear small, disparities in household worth result in much higher debt burdens for students of color.
As of 2022, the median worth of white households stood at $284,310, while the median worth of African American households stood at $44,100 and that of Hispanic households was $62,120. The median worth of households classified in the “other” category stood at $132,200.6
Median debt figures for education installment loans by race or ethnicity are relatively equal, at $13,000 for Hispanic households, $25,000 for whites and those in the “other” category, and $26,000 for African Americans.7 But the imbalances in the ratio of debt-to-median-net-worth by race are stark.
| Racial/ethnic group | Median net worth | Student debt | Ratio of debt to median net worth |
|---|---|---|---|
| White | $284,310 | $25,000 | 8.8% |
| Other | $132,200 | $25,000 | 18.9% |
| Hispanic | $62,120 | $13,000 | 20.9% |
| African American | $44,100 | $26,000 | 59.0% |
A Majority of African American Undergraduate Students Are Pell Grant Recipients
Fortunately, the federal government provides direct grant assistance for students struggling with student loan debt. For example, the Pell Grant program, the nation’s primary federal direct student grant assistance vehicle, awarded up to $6,895 for the 2022–23 award year to students with a demonstrated need.
Other federal student aid grant programs include the Federal Supplemental Educational Opportunity Grant, which awarded up to $4,000 a year in 2022-23, and the Teacher Education Assistance for College and Higher Education Grant, which awarded up to $3,772 a year to students preparing to teach in a high-need field.
The Iraq and Afghanistan Service Grant awarded up to $6,501.99 to students whose parent or guardian served in the U.S. armed forces and died as a result of performing military service in Iraq or Afghanistan after the events of 9/11.8
The need is evident, given that 57% of African American and 46% of Hispanic undergraduate students are Pell Grant recipients.9
| Racial/ethnic group | Percentage of students receiving Pell Grants |
|---|---|
| African American | 57% |
| American Indian | 51% |
| Hispanic | 46% |
| Pacific Islander | 35% |
| White | 31% |
| Asian | 30% |
African American Bachelor’s Degree Recipients Pay $404 on Average in Student Loan Debt Per Month
The racial wealth gap results in fewer college students of color having enough resources to pay their way without student loan support. Those students are burdened coming out of college with additional financial responsibilities they may not be able to handle.10
For various reasons, Hispanic students tend to borrow less when they go to college. For example, they tend to stay in school longer because they seek to balance school with work. However, Hispanics face disproportionate challenges in paying off the debt they owe.11
| Racial/ethnic group | Average monthly payment |
|---|---|
| African American | $404 |
| White | $366 |
| Asian | $362 |
| Multiracial | $362 |
| Hispanic | $321 |
Asian Bachelor’s Degree Graduates Pay 37% of the Amount Borrowed Within Four Years
A key factor in examining the intersection of race and ethnicity with student loan debt is what happens after students graduate and get out on their own.
Because degree-seeking students don’t pay back loans while in school, the impact of student loan debt on a person’s income takes place after they find employment and start earning.
Student loan debt — and its role in a borrower’s debt-to-income ratio — is the biggest hurdle to saving for a downpayment on a home or to qualify for a mortgage. African American homebuyers report the highest share of student loan debt at 43%, with a median amount of $40,000.12 Student loan debt also negatively correlates with entrepreneurship.13 And a higher debt-to-income ratio contributes to lower consumption growth.14
Asian American bachelor’s degree recipients demonstrate the greatest propensity to repay loans quickly. Four years after graduating, Asian Americans owe an average of 63% of the borrowed debt. Among the racial/ethnic groups measured in the data, African Americans were the only group that owed more than they originally borrowed, with the average percentage owed at 105%.15
| Racial/ethnic group | Percentage owed after four years |
|---|---|
| Asian | 63% |
| White | 73% |
| Pacific Islander | 82% |
| Hispanic | 84% |
| Multiracial | 84% |
| American Indian/Alaska Native | 87% |
| African American | 105% |
Students of Color Experience the Highest Gap Between Total College Costs and Unmet Need
We already know from the above data on the high percentage of African Americans and Hispanics who are Pell Grant recipients that lower-than-average family wealth contributes to the necessity of student loan debt.
What’s interesting about the following insight is that Pell Grants and other financial aid grants do not adequately compensate for that. Students most likely to receive Pell Grants are also most likely to have unmet financial need pertaining to their education.
Compared to white students on average, American Indian or Alaska Native, Asian, African American, Latinx or Hispanic, and Native Hawaiian or Pacific Islander students experience a higher gap between total tuition and non-tuition expenses and available grant aid and family resources.
Among Pell Grant recipients, 90% have unmet need compared to 56% for non-Pell Grant recipients. Ummet needs along racial lines fall along familiar patterns.16
| Racial/ethnic group | Percentage of Pell Grant recipients with unmet need |
|---|---|
| White | 68% |
| American Indian or Alaska Native | 78% |
| Asian | 78% |
| Native American or Pacific Islander | 78% |
| Latinx or Hispanic | 82% |
| African American | 88% |
Hispanics Are Most Likely to Be Behind on Payments, But Delinquency Rates Are Improving
The difficulty in repaying student loans varies according to race and ethnicity, but the good news is that the students struggling the most also seem to be improving at higher rates than the majority.
These numbers reveal that people want to repay their debts.
We’ve already seen in the section on student loan debt per month that Hispanics tend to borrow less because they may tend to stay in school longer and combine education with job responsibilities. These challenges continue once Hispanics leave school.
However, the relatively rapid decrease during the pandemic in loan delinquency rates among African Americans and Hispanics signals something positive in the student debt landscape where racial and ethnic differences express the racial wealth gap and point to chronic disparities.17
| Racial/ethnic group | 2019 delinquency rate | 2021 delinquency rate | % change |
|---|---|---|---|
| African American | 29% | 17% | -12 |
| Hispanic | 24% | 18% | -6 |
| White | 11% | 9% | -2 |
Student Loan Debt Resources
Fortunately, resources to understand and plan for student loan debt abound. The best source of tools and resources is Federal Student Aid, the nation’s largest student financial aid provider.
Federal Student Aid offers the FAFSA® form to apply for federal student loans. FAFSA stands for Free Application for Federal Student Aid. Applying for assistance through FAFSA is a yearly ritual for most US college students regardless of financial status.
Federal Student Aid offers various income-driven repayment plans to assist financially challenged students with monthly payments. Plans include SAVE, introduced in 2022 to limit monthly payment amounts to 10% of discretionary income.
Forgiveness, cancellation, and discharge options are also available. Students may qualify for forgiveness in many ways, including occupation, disability status, and income. Federal Student Aid offers many tools to help students and graduates understand their options and obtain the support they qualify for.
More Student Loan Debt Statistics
Average Student Loan Debt Per Month
Average Student Loan Debt by Degree
Average Student Loan Debt by Year
Average Student Loan Debt by State
Average Student Loan Debt by Generation
Average Student Loan Debt by Age
Data Sources:
1 https://www.stlouisfed.org/institute-for-economic-equity/the-state-of-us-wealth-inequality
2 https://nces.ed.gov/programs/digest/d22/tables/dt22_330.40.asp
3 https://www.federalreserve.gov/releases/g19/HIST/cc_hist_memo_levels.html
4 https://www.stlouisfed.org/institute-for-economic-equity/the-state-of-us-wealth-inequality
5 https://nces.ed.gov/programs/digest/d22/tables/dt22_331.95.asp
6 https://www.federalreserve.gov/econres/scf/dataviz/scf/table/
7 https://www.federalreserve.gov/econres/scf/dataviz/scf/table/
8 https://studentaid.gov/sites/default/files/federal-grant-programs.pdf
9 https://educationdata.org/pell-grant-statistics
10 https://nces.ed.gov/programs/digest/d22/tables/dt22_331.95.asp
11 https://www.cnbc.com/2023/10/02/latino-student-loan-borrowers-face-extra-challenges-as-bills-restart.html
12 https://www.nar.realtor/sites/default/files/documents/2021-the-impact-of-student-loan-debt-report-executive-summary-09-14-2021.pdf
13 https://pubsonline.informs.org/doi/abs/10.1287/mnsc.2017.2995
14 https://www.fdic.gov/analysis/cfr/consumer/2019/documents/papers/bahadir-paper.pdf
15 https://nces.ed.gov/fastfacts/display.asp?id=900
16 https://www.ihep.org/college-affordability-still-out-of-reach-for-students-with-lowest-incomes-students-of-color/
17 https://www.federalreserve.gov/publications/files/2021-report-economic-well-being-us-households-202205.pdf
