Demos 1 Demos.org Student Debt and the Racial Wealth Gap Mark Huelsman Associate Director of Policy & Research @markhuelsman
Demos 2 Demos.org A $1.6 TRILLION DEBT PROBLEM DIDN’T JUST COME OUT OF NOWHERE… “We’re telling people that higher education is essential. But you’re asking us to take on so much debt, it feels like a trap.”
Demos SHARE OF COLLEGE COSTS COVERED BY STATE covered by the Pell Grant in the Percentage of college costs covered by the Pell Grant today 3 Cut in per-student support for public higher education since 2001 SUPPORT VS. TUITION REVENUE IT’S CAUSED BY DISINVESTMENT… Percentage of college costs Demos.org 1970s 2001 1990 19% 25.0% 29.5% 70.5% 75.0% 76% 2017 2008 28% 35.8% 46.4% 53.6% 64.2% Source: State Higher Education Executive Officers; College Board
Demos Demos.org … THE SKYROCKETING COST OF ATTENDANCE… Increase in Private College Costs since the late 1970s, after inflation 2.8x Increase in Public College Costs since the late 1970s, after inflation 2.7x “My family took out a big loan not because we wanted to, but because there was no other way.” 4 Total Cost of Attendance, Inflation-Adjusted, 1980- 2020 $60,000 $49,870 $50,000 $41,780 $40,000 $33,060 $30,000 $25,900 $17,580 $20,000 $21,950 $18,160 $10,000 $12,440 $9,730 $8,180 $0 79-80 89-90 99-00 09-10 19-20 Public Four-Year Private Nonprofit Four-Year Source: College Board
Demos Demos.org ... MORE STUDENTS ATTENDING, WAGES STAGNATING… 5 Total Fall Enrollment in Postsecondary Institutions and Real Hourly Wages of Bachelor's Recipients Age 21-24 Over Time 22 22,000,000 $20.37 20 20,000,000 $19.26 19,765,598 $19.52 18 18,000,000 $17.42 16 16,000,000 15,312,289 14 14,000,000 About when the 12 student debt crisis 12,000,000 becomes a thing. 10 10,000,000 Sep-00 Sep-01 Sep-02 Sep-03 Sep-04 Sep-05 Sep-06 Sep-07 Sep-08 Sep-09 Sep-10 Sep-11 Sep-12 Sep-13 Sep-14 Sep-15 Sep-16 Sep-17 Great Recession Real Hourly Wages College Enrollment Sources: Economic Policy Institute; College Board
Demos 6 Demos.org … AND THE COSTS OF EVERYDAY LIFE, FROM RENT TO INSURANCE TO TRANSPORTATION TO CHILDCARE… “Before I even think about going back to school, I need to make sure I can still put food on the table for my kid.”
Demos 7 Demos.org IF RENT EATS UP YOUR BUDGET, HOW DO YOU PAY FOR SCHOOL? 60% 54.1% 49.0% 48.5% 50% 40% 30% 31.3% 20% 25.6% 23.8% 10% 0% 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Cost Burdened Severely Cost Burdened Notes: Cost-burdened households are defined as paying more than 30% of income for housing; Severely cost-burdened households are defined as paying more than 50% of income in housing. Source: Harvard Joint Center for Housing Studies
Demos 8 Wage Inequality Childcare Costs Housing and Rent Demos.org BUT WE KNOW THESE THINGS ARE NOT FELT EQUALLY For centuries, black families have been locked out of the ability to build wealth through homeownership, face greater levels of housing discrimination, and are more likely to be burdened by rising rent. 1 in 4 students are parents themselves. Daycare costs can make up over a quarter of a year’s income for Black and Latino Americans. Nationally, the typical white household earns $29,000 more per year than the typical black household, and $19,000 more than the typical Latino household.
Demos 9 Demos.org WHICH BRINGS US TO THE RACIAL WEALTH GAP Median Net Worth by Race $180,000 $171,000 9% of white $160,000 households have $140,000 zero or negative net worth $120,000 $100,000 $80,000 19% of black households, 13% of Latino $60,000 Households, and 14% of other households $64,800 have zero or negative net worth $40,000 $20,000 $20,700 $17,600 $- White Black Hispanic/Latino Other Source: Calculations from Federal Reserve Survey of Consumer Finances
Demos 10 Demos.org EDUCATION: THE GREAT EQUALIZER? $18,000 with a high school degree. have less wealth than white households Latino households with a college degree $26,000 with a high school degree. have less wealth than white households Black households with a college degree Median Net Worth by Race and Education Level $399,000 Source: Calculations from Federal Reserve Survey of Consumer Finances $210,600 $117,600 $102,000 $86,690 $76,500 $68,200 $94,500 $29,000 $22,200 $15,600 $14,100 $8,300 $10,910 $17,730 $22,950 White Black Hispanic/Latino Other High School or Less Some College, No Degree Associate Degree Bachelor's or Higher
Demos Black public 4-year graduates take take on debt. Black community college graduates on debt. 8 in 10 11 6 in 10 THE RESULT: UNEQUAL DEBT Demos.org Percent of Public College Graduates with Debt, 2016 82% 81% 73% 68% 61% 58% 50% 49% 45% 42% 39% 27% 26% 19% White Black or Hispanic or Asian More than one Never Received Received Pell African Latino race Pell American Source: Calculations from Public 2-Year Public 4-year National Postsecondary Student Aid Survey, 2016
Demos 12 Demos.org THE RESULT: UNEQUAL DEBT Cumulative Debt for Graduates, 2016 $43,093 $42,044 $41,135 $38,522 $37,972 $36,141 $31,809 $30,125 $29,753 $29,080 $28,873 $27,814 $26,033 $22,105 $20,838 $19,429 $18,598 $15,419 $11,763 $11,075 Public 2-Year Public 4-Year Private Non-Profit For-Profit White Black or African American Hispanic or Latino Asian More than one race Source: Calculations from National Postsecondary Student Aid Survey, 2016
Demos Over half of black men student loans within 12 years of starting 13 school. default on their Demos.org IT’S NOT JUST THE AMOUNT OF DEBT… Percent of borrowers who started college in Race/Ethnicity and Gender 2003-04 and defaulted on a loan within 12 years N/A Male American Indian or Alaska Native 45% Female N/A Male Asian 12% Female 55% Male Black or African American 45% Female 35% Male Hispanic or Latino 35% Female 21% Male White Source: Calculations from 20% Female National Center for Education Statistics, 43% Male Beginning Postsecondary More than one race Students Survey 03-04, 37% Female Second Follow-Up
Demos White men have paid Black women have 13% more than they 14 started with… off 44% of their debt. Demos.org … IT’S THE ABILITY TO PAY ANY OF IT OFF. Median Ratio of Original Balance Still Owed on Race/Ethnicity and Gender Federal Loans, 12 Years after Beginning College N/A Male American Indian or Alaska Native 98% Female 45% Male Asian 47% Female 111% Male Black or African American 113% Female 79% Male Hispanic or Latino 86% Female 56% Male White Source: Calculations from 72% Female National Center for Education Statistics, 76% Male Beginning Postsecondary More than one race Students Survey 03-04, 80% Female Second Follow-Up
Demos 15 Demos.org INTERGENERATIONAL WEALTH PLAYS A BIG ROLE (OR, WHITE PEOPLE DO GREAT WITH THEIR PARENTS’ MONEY) • White, college-educated families more likely to get large gifts (>$10,000) and inheritances • One-time safety net gifts (oh no, the rent is due!) • Psychological impact of debt and debt aversion in black and brown communities
Demos 16 Demos.org THE LESSON: STUDENT DEBT IS BOTH CAUSE AND CONSEQUENCE OF THE RACIAL WEALTH GAP
Demos 17 Demos.org SO WHAT DO WE DO ABOUT IT? Targeted or Universal Debt Cancellation: Forgive all debt for some, and some debt for all? Cancel debt for those in public benefit programs? Make Student Debt More Humane: Reform bankruptcy laws, reform forgiveness programs, shield Social Security and other essentials from debt collection. Debt-Free College, but not in a vacuum. Wage inequality is a student debt issue. Affordable housing is a student debt issue. Childcare is a student debt issue. Debt-free college needs to be holistic to be a policy with racial equity at its core.
Demos 18 Demos.org Demos.org We are a dynamic “ think-and-do ” tank that powers the movement for a just, inclusive, multiracial democracy.
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