Although high outstanding student loan debt has been a problem for years, only relatively recently has the idea of simply annulling that debt begun to garner mainstream support. Internet searches for “student loan forgiveness” and “student loan cancellation” have spiked since the beginning of 2021, and it’s easy to understand why. Americans collectively owe $1.7 trillion in student loan debt, an amount larger than the gross domestic product (GDP) of nearly every country on Earth.

It’s a huge financial burden that is only going to continue to grow. It places substantial pressure on an already economically vulnerable populace—young people and others just getting started with their careers and their families, particularly those from lower-income backgrounds. Looking at student loan debt by race, it becomes apparent that while this issue affects almost everyone in the United States to some extent, some groups are having a harder time than others.

Understanding Student Loan Debt

Student loan debt is the end result of taking out money to pay for an education, including the cost of any tuition not covered by scholarships, textbooks, living expenses, and other associated expenses. The escalating price of higher education has made it extremely difficult to afford without some form of financial assistance.

In the likely event that a student cannot find a sufficiently high-paying job after graduation, they will obviously have difficulty paying back their loans. Delinquency is the consequence of missing a repayment due date by even one day. After a certain period of delinquency, depending on the type of loan, there is a risk of going into default. Each of these conditions can have a substantial impact on a person’s financial circumstances, particularly when it comes to their credit score and credit report.

At the end of 2021, student loan debt affects more than 43 million Americans, and costly repayments can make it arduous to save money for long-term goals. What’s more, this burden doesn’t affect all Americans equally. Members of some racial or ethnic groups are more likely to have larger student loan debt balances on average.

These discrepancies can be caused (or at least influenced) by racism. And while student loan differences can be both a symptom of greater socioeconomic inequities and a reinforcement of them, other factors also can influence how much debt a group will collectively owe:

• Total U.S. population: The size of a population group can skew certain statistics. For instance, if a study finds that one group has a larger number of student loans than other groups, it may simply be because there are more people in that group.
• Differences in income: It’s obvious, but still worth mentioning, that those with higher incomes after graduating will have an easier time paying down their debt. The Bureau of Labor Statistics (BLS) releases a quarterly report that shows a wage gap by race does indeed exist.
• Career distribution: Similarly, if more members of a particular group have careers in high-paying industries—such as science, technology, engineering, and mathematics (STEM) fields—they will be able to more easily repay their student loans. The inverse is also true; groups with a disproportionately large presence in low-wage positions, such as food service, will likely take longer to fully repay their debt or have more trouble meeting minimum required payments.
• Credit and lending issues: It takes good credit to secure a private student loan, especially at a favorable interest rate. Additionally, if more members of particular groups are targets of predatory lending, paying back student loans can be even more difficult.
• Familial wealth: Affluent families may choose to finance the entirety of their child’s education, leaving them debt free upon graduation. Conversely, those who are struggling may have to rely on their children for financial support, which puts additional economic strain on anyone already struggling to repay student loans.
• Parental obligations: Young parents, particularly single ones, must factor childcare into their budget. Depending on their income, they may be unable to afford this expense, basic necessities, and paying down their debt.
• Local cost of living: The affordability of basic necessities, such as housing, can vary substantially. Those who study in areas with a higher cost of living will, of course, need to borrow more money to afford their living expenses.
• Type of institution: The cost of attendance at an institution can vary based on whether it’s public or private, for-profit or nonprofit, and two-year or four-year. These differences show up in tuition, fees, room and board, books, and other academic supplies.
• Loan type: There are two basic types of student loans: federal loans funded by the U.S. government and private loans provided by banks and other nonfederal lenders. Multiple factors can determine how difficult each one is to repay. For example, private loans are generally more expensive than their federal counterparts and may have higher interest rates.
• Graduation status: If a student takes out a loan for college but doesn’t graduate, they’re stuck with a significant debt without the economic benefits that come with a degree. Additionally, those seeking a postgraduate education may need to take out additional money on top of the debt accumulated for undergraduate education.

Before we share our findings on how student loan debt differs by race, there’s one more issue to discuss: Much of the available research on the differences in student loan debt by race compares Black and White borrowers only. There is less information that includes the full range of racial groups within the United States. Certain data sets covering one or more group(s) don’t include others. Or, the information on the wider range of groups may originate from a different (and sometimes less recent) source.

Note that the names of certain groups used below may not be entirely consistent throughout the article to match the terminology used by our sources. For example, although Investopedia prefers the identifier “Latinx,” this article uses categories such as “Hispanic” to provide an accurate representation of how the study that we quote reported the information.

Size of Student Loan Debt by Race

According to the Board of Governors of the Federal Reserve System, at $44,880 on average, Black borrowers took out the largest amount of federal student loan money in 2019. Although “Other” was technically the second highest, at $40,400, it’s unclear from the Fed’s website which groups comprise this category, which limits its effectiveness in comparisons. White borrowers accounted for the second-largest amount for a single group. Finally, Hispanic borrowers took out the smallest amount on average, at $30,890.

Of note: When the Fed began recording this data in 1989, Black borrowers had the smallest amount of student loan money. They overtook all other categories (excluding “Other”) after 2010, with one dip in 2013.

A sobering statistic: The U.S. Department of Education found that, within a four-year period following graduation, 48% of Black students have experienced their debts rising to amounts larger than what they originally borrowed, compared to just 17% of White graduates.

Looking at the intersection of race and gender, the general trends are relatively similar to what the Fed reported. Here’s what the American Association of University Women (AAUW) found:

• Black women had the largest average student loan debt in 2021, with Black women having the highest overall debt at $41,466.
• Next largest group was the Pacific Islanders/Hawaiian women at $38,747, then American Indian/Alaska Native women at $36,184, then White woman at $33,852.
• Hispanic/Latinx borrowers were the next highest group at $29,302.
• Asian borrowers owed the lowest amounts, with men also owing slightly more than women.

Additional discrepancies can be seen in how loans are distributed, depending on both race and where the student studied. This is what the Student Borrower Protection Center reported (also visible in the above chart):

• Black/African American graduates across all types of institutions constituted the highest percentage of borrowers to finance higher education in 2020.
• Asian borrowers had the lowest percentages across all categories, meaning they were the most likely to graduate without any student loan debt.
• White borrowers had the second highest percentage in public two-year universities, the third highest in both public four-year and private nonprofit two-year universities, and the fourth highest in private nonprofit four-year universities.
• Percentages for both Hispanic/Latinx and American Indian/Alaska Native graduates were generally on the higher side, excluding public two-year institutions.

It’s also worth noting that, across all five groups, the percentages of borrowers for private nonprofit two-year universities were both the highest and had the least amount of difference among the groups. A possible explanation for this is that private nonprofit two-year universities have a higher cost of attendance, as the Urban institute found in 2017–2018.

Impact of Race on Student Loan Debt

It’s no secret that high student loan debt is a major problem for most borrowers, regardless of their background. Looking at median income and student debt since 2009, the Brookings Institution found an ever-widening gap between what people earn and what they owe for their education. While the difference has diminished over time for Asian borrowers, the gap has grown wider for Black borrowers.

Black borrowers. Racial differences in family wealth exacerbate the debt issue for all students of color, but especially for Black borrowers. According to the Student Borrower Protection Center, Black students had less household wealth and took on more loans to finance their education in 2020 than other groups.

Additionally, a 2017 report from the Federal Reserve Bank of St. Louis found that postgraduate White households generally receive financial support from their family, whereas their Black counterparts instead contribute portions of their income to help their family. These contributions limit the ability to build wealth. As a result, when these borrowers have children of their own who eventually enroll in college, the cycle often begins anew. Carrying larger amounts of student loan debt can also damage the creditworthiness of Black households.

Latinx borrowers. This population also faces financial difficulties as a result of their student loan debt. With educational costs rising and grant amounts shrinking, UnidosUS found that Latinx students and their families frequently chose to pay out of pocket and/or take out student loans to finance their education in 2019. Despite attending college with lower incomes and less intergenerational wealth than their White counterparts, Latinx borrowers on average paid more to attend college than White borrowers.

The role of private student loans

Further worsening the student debt crisis for borrowers of color are private student loans. Private loans can be useful to augment federal loans, which may not let students borrow enough to fund the cost of their school. However, private loans lack many of the safeguards that federal student loans offer, which can protect a student from going into default due to economic hardship. As a result, private borrowers have fewer options should they fall behind on their payments.

What’s more, most federal loans don’t require a credit check and have a set interest rate. Private loans generally do—and interest rates are based on the credit ratings of the borrowers and may require a co-signer. The racial wealth gap can result in student loans costing more, as borrowers with lower credit scores may be charged higher interest rates.

According to the Student Borrower Protection Center, students of color (specifically Black and Latinx students) and low-income borrowers overall used private loans less often than all White borrowers but were more likely to have trouble paying down their private-loan debt. Black students, in particular, were four times as likely to have trouble repaying private debt compared to White students, even though the latter are twice as likely to use this form of lending.

Two possible contributing factors:

• Private loans require a credit check; interest rates are based on the credit ratings of the borrowers and may require a co-signer. (Most federal loans have no credit check and the same interest rate for all borrowers.) The racial wealth gap can result in student loans costing more, as borrowers with lower credit scores may be charged higher interest rates.
• In addition, private student loans are more often taken out by students attending for-profit institutions. A number of these institutions, including Corinthian Colleges and ITT Technical Institute, have been accused of fraud related to student loans. Many of these loans take the form of “shadow” debt, a largely unregulated market that often features high interest rates, misleading marketing, and risky underwriting. Since Black borrowers are overrepresented in for-profit institutions, they are also the most likely to fall victim to this form of predatory debt.

Differences in repayment

Perhaps the greatest impact of discrepancies in student lending is how they affect each group’s ability to repay their debt. In 2019, the Center for American Progress broke down the differences in student loan default rates by race and institution type from two years prior.

Loan default rates were lowest for borrowers who attended public four-year universities, followed by private nonprofit four-year, public two-year, and private for-profit institutions. White students had the lowest default rates across all categories. Hispanic or Latinx borrowers had figures similar to their White counterparts, with the largest difference between the two groups being 7% for “All Institutions.” Black students had the highest default rates, with the largest being 42% for private for-profits.

As discussed previously, being unable to repay loans will cause graduates to lapse into delinquency and, eventually, default. The potentially devastating financial consequences disproportionately fall on Black communities, and difficulties in paying down debt cannot be attributed to income inequality alone. According to Brookings, although there were quantifiable family income and wealth differences between Black borrowers and White borrowers in 2018, these accounted for roughly half of the default rate gap between these two groups. Even further controlling for differences in degree attainment, college grade point average, and post-college income and employment, this gap remains.

The author posited that differences in loan counseling or servicing may have been the cause of the remaining gap. In 2016, the Consumer Financial Protection Bureau (CFPB) found approximately 11,700 complaints from borrowers regarding both federal and private loans, with the most common issues pertaining to income-driven repayment plans, payment processing, and borrower communications. However, although the CFPB reported that students of color may face additional challenges with current servicing and collection practices, it didn’t provide any concrete data. Ultimately, differences in repayment rates are likely the result of all of the factors discussed throughout this piece, including the greater percentage of Black borrowers who also financially support their families and the greater proportion of White borrowers whose families help support them.

Information gaps

Although there’s no doubt that student debt disproportionately affects borrowers of color, it’s difficult to determine the full scope of its effects. As mentioned previously, because much existing research focuses on Black and White borrowers, there is less information about how other racial and ethnic groups are affected. For instance, while the Lumina Foundation was able to determine that Black, Hispanic, and Native American borrowers generally had higher unmet financial needs, incurred more student loan debt, and were more likely to struggle financially to stay in school in 2020, it didn’t specify whether this was also the case for Asian borrowers and Native Hawaiian/Pacific Islander borrowers.

In fact, Asian Americans are often excluded from these data sets, as is evident in the Fed’s findings on average student debt amounts and the Center for American Progress’ research on default rates by race. At least with the former, we can assume that the “Other” category includes Asian borrowers, but it’s unclear whether that’s also true for the latter’s “All borrowers” grouping, as that could be just the three groups included in the chart. For example, Brookings found that Asian borrowers were the least likely to default on their student loans from 2007 to 2008, but this may not still be the case.

The Bottom Line

Given the hefty financial burden that education debt places on most Americans, particularly students of color, it’s little surprise that there has been such a push recently for cancellation of student debt. The American Civil Liberties Union, for instance, has called upon the Biden administration to forgive at least $50,000 per borrower.

The question of whether to forgive student debt isn’t simple, and doing so won’t be a silver-bullet solution to all of the institutional discrimination endemic to higher education. However, the assumption that hard work and a college degree are all that’s needed to be financially successful ignores the reality that some students will unfairly face a greater burden than others.