By Jessica Blake
Black and Hispanic student loan borrowers experience disproportionate repayment challenges compared to their white peers, a new report from the Pew Charitable Trusts shows.
Looking at a representative survey of borrowers who took out undergraduate loans between 1998 and 2018, researchers found that half of Black borrowers and 40 percent of Hispanic borrowers reached default, compared to 29 percent of white borrowers.
The survey findings, combined with an academic literature review, show that the disparity is likely linked to the fact that Black and brown students face more barriers to completing a degree and have a higher likelihood of facing financial difficulties. Obstacles can include lower household income, unstable employment, first-generation status and competing family or work obligations.
Combined, these challenges put students of color at a high risk of falling behind on their payments and ending up in default, which occurs after 270 days of nonpayment and can trigger severe consequences like seizure of tax refunds, wage garnishments, high fees and a decline in creditworthiness.
The research group also found that current repayment options designed to help borrowers struggling with loan repayment may be underused. For example income-driven repayment plans, which set the amount a borrower must pay based on their income and family size, are used by just 32 percent of Hispanic borrowers and 45 percent of Black borrowers.
“With millions of borrowers having recently reentered the collections system for the first time in several years, and new defaults set to begin occurring as early as summer 2025, it is important for policymakers to immediately attend to this issue,” the report’s authors write.
They recommend that policymakers restructure and expand borrower pathways out of default, eliminate collection requirements that make it harder for borrowers to repay their loans and better match borrowers with the right repayment options.
“These measures won’t fully address the severe repayment barriers that many Black and Hispanic or Latino borrowers face,” the authors write. “But, over time, they could make the repayment system fairer, easier for all borrowers to navigate, and less harmful to those who face steep repayment barriers.”