How the student loan system harms vulnerable borrowers

It’s widely known that the burden of student loan debt disproportionately affects borrowers of color. In particular, Black borrowers are more likely to default on their loans and carry larger debt loads than white borrowers. 
It’s one example of the inequities facing Black students, who are also more likely to attend historically underfunded institutions and be targeted by and enroll in for-profit colleges.
Earning a college degree doesn’t even necessarily shield Black students from being unable to make loan payments — “Black graduates with bachelor’s degrees default at higher rates than white students who do not complete a credential,” New America said in an analysis of student loan defaults released earlier this week.
The think tank zoomed in on the experiences of nearly 50 borrowers who defaulted on their student loans, via focus groups. About half of the participants were Black borrowers.
“We know the default system is broken, but it’s especially harming these borrowers who are vulnerable in other ways as well,” Sarah Sattelmeyer, the project director of education, opportunity and mobility at New America, told me. Sattelmeyer co-researched the project.
A borrower defaults when they miss at least 270 days worth of student-loan payments. As of March 2022, 7.5 million borrowers — nearly one in five — were in default on their federal student loans, according to New America. This situation not only causes financial stress, but it contributes to the existing racial wealth gap.

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