Data Dialogue - Student Loan Debt: racial disparities and shared family burdens

The JPMorganChase Institute hosted a Data Dialogue on November 19, 2020, to discuss student loan debt in the context of COVID-19 and disparities in how different socioeconomic and demographic groups manage student debt. The virtual discussion convened experts who are at the forefront of using data to better understand student loan issues and policies. The panel included Darrick Hamilton, Henry Cohen Professor of Economics and Urban Policy at The New School and founding Director at the New School’s Institute for the Study of Race, Stratification and Political Economy, Frederick Wherry, Professor of Sociology and Director of the Dignity and Debt Network at Princeton University, and Seth Frotman, Executive Director of the Student Borrower Protection Center. See below for a summary and replay of the conversation.

Fiona Greig, Director of Consumer Research at the JPMC Institute, opened the discussion by describing the economic impact of student loan debt, which exceeds $1.6 trillion for borrowers in the U.S. collectively. She pointed to Institute research which has shown that while most student loan borrowers are not unreasonably burdened by student loan payments, a large number of borrowers still struggle to keep up payments, and those borrowers are already economically vulnerable: lower-income, older, and especially Black borrowers. Additionally, the economic impacts of student debt extend to a broader portion of the population than previously thought: almost 40 percent of individuals involved in student loan repayment are helping someone else pay off their student loan debt, with most helpers holding no student loan debt themselves.

Frederick Wherry, Darrick Hamilton, and Seth Frotman shared insights from their research and the policy implications in this panel, moderated by Grieg.

What else do we need to understand about the context and policy landscape?

Frotman spoke to the speed and scale at which student loan debt has risen over the last ten years — an increase of 110 percent — and the disparities in debt burdens that disproportionately impact some particularly vulnerable groups of borrowers. For instance, borrowers over the age of 50 owe more than three times the amount owed by younger borrowers; while Black borrowers owe nearly 50 percent more than their white peers upon graduation. Invoking research from the Institute on Assets and Social Policy, Frotman noted that the median white borrower will have paid 94 percent of their student loan debt twenty years after college enrollment. Yet, the median Black borrower still owes 95 percent of their student loan debt over the same period of time.

How does student loan debt impact college accessibility and racial disparities?

Darrick Hamilton discussed the impacts of the racial wealth gap on student loan debt. Student loan borrowers have been saddled with debt, he said, and many are still recovering from the last economic recession. More significantly, Black student loan borrowers tend to owe more at the four-year mark after graduation — an average of $53,000 — compared to an average of $28,000 for white borrowers over the same time frame.

Hamilton noted that Black student loan borrowers are also more likely to drop out of college due to the financial burden, making it even harder to afford payments that typically begin after graduation. Many borrowers are unable to reap the economic benefits of seeking higher education whether or not they earn a degree.

What more can we learn about how people experience debt relief?

Frederick Wherry discussed the idea of targeted debt assistance for some student loan borrowers. Wherry drew parallels to public welfare benefits and services — iterating that an individual’s experience with debt relief and the mode of delivery could be key factors in enabling a borrower’s sense of dignity. Too often, people seeking public assistance may feel they are forced through hoops, or rigid bureaucracies, and forced to present their suffering to get help. While targeted student debt relief may improve the financial health of its recipients, policymakers must also be careful to consider the mode of delivery to preserve each individual’s sense of dignity.

How has COVID-19 made this worse? Has the CARES Act started a new conversation?

Panelists also described the potential for policymakers to consider new ways forward given the availability of data. The COVID-19 pandemic has highlighted the pervasiveness and burden of student loan debt. The CARES Act, signed into law in March of this year, provided payment forbearance for student loan borrowers. With the CARES Act ending in December, the panelists emphasized that policymakers have the opportunity to consider new guardrails and supportive measures to prevent forthcoming borrowers from falling into the student debt trap and may consider options for debt relief. Let data coupled with compassion have the last say, Wherry ended.

We are grateful to the panelists for their expert insights and perspectives, which are invaluable as we navigate the road to financial health and economic recovery.