Aug. 31 could be a pivotal day for millions of Americans: the end of a two-year payment freeze on student loan repayment. Since March 2020, when the pandemic first thrust the nation into economic uncertainty, Americans with outstanding student loans have been able to bypass their monthly payments without accruing interest or late fees.
For Black borrowers, who owe a disproportionate amount of the $1.7 trillion in national student loan debt, the end of the pay break will be disastrous. During his campaign, President Joe Biden pledged to forgive $10,000 in student loan debt — which many held onto amid the rising costs of goods, job insecurity and a plummeting economy.
But whether Biden will follow through on his pledge is uncertain. And no one is quite sure whether the loan payment freeze will actually end in August. The Biden administration could decide to extend the deadline, as it has done before.
The student loan crisis for Black Americans is compounded by a history of economic policies that have targeted them — from sharecropping, in which white landowners took the bulk of profit made by Black agricultural workers, to subprime mortgages and loans that left Black homeowners with astronomically high interest rates. In recent years, for-profit schools have reportedly targeted Black Americans, saddling them with even more debt.
In one recent study, which surveyed nearly 1,300 Black borrowers, 64% said their mental health had been significantly affected by their student loans. Jalil B. Mustaffa was lead researcher on that study and an author of the related report, “Jim Crow Debt: How Black Borrowers Experience Student Loans,” published by The Education Trust. Capital B spoke to Mustaffa, co-founder of the Equity Research Cooperative consultancy. The conversation below was lightly edited for clarity and length.
Capital B: For the National Black Student Debt Study, you and your fellow researchers surveyed nearly 1,300 Black borrowers and conducted in-depth interviews with 100. Can you summarize what respondents told you? How did this debt affect them?
Jalil B. Mustaffa: When we launched a study and started to hear from Black borrowers, what was clear was that there was this national policy narrative that student loans are OK, that actually they’re good debt. And one of the big things that Black borrowers pushed back against was this idea of student loans being good debt. Student loans were often described as a debt trap, as predatory. One borrower describes it as absurd to have to take on student loans after knowing this history of Black people being excluded from higher ed.
There also was a lot of pushback against what is kind of the No. 1 reform around student loans: income-driven repayment plans. Many Black borrowers described those as lifetime debt sentences where, yes, they were making payments, but the payments that they could afford were so small that they weren’t making enough to cover both the principal and their interest. They are still watching their student loans grow over time.
The third finding was around the policy conversation of student debt cancellation. So, sometimes, it’s argued that it shouldn’t go to those who have graduate degrees. It shouldn’t go to those who have student debt over $10,000. And many Black borrowers push back against that, because again, the reality of their experience was that they made all the right choices, but they had to take on the student loans in order to access higher ed. It wasn’t from being reckless or irresponsible, but the reality was to live and go to school, they had to take on student debt.
In this study, you point out that “Black students are more likely to borrow, borrow more, and are more likely to struggle with repayment than their peers.” Can you explain why we’re seeing this trend?
We have a long history of ongoing practices where the history of U.S. policymaking has really dismantled and extracted the wealth base of Black people. Higher education is really sitting right on top of that history of ongoing practices of extracting and dismantling the Black economic and wealth space.
When we create a policy, like student loans, where we offer all groups, across communities and racial groups, the same loan terms, and the same type of loans, Black people will still experience student loans very differently because they are coming from a history of ongoing practices of racism and discrimination. Even if we borrow loans on the same terms, we have to borrow more. We have to borrow more to go to institutions that often are more underfunded and lower performing.
And then, when we do manage to graduate, we’re often entering labor markets to find out that we’re being underpaid or underemployed. So then, we go get more credentials with really the hope that more credentials can be a buffer against the wage and employment discrimination that we’re facing. In my opinion, the heart of how you get into a Black student debt crisis is you continue to offer a policy that doesn’t match the reality or the history of college access, mobility, or the Black experience in our country.
Let’s talk about the financial toll: Your study states that Black borrowers owe an average of $55,532 in graduate loans, compared to just $27,962 for white people. That’s a very sizable chunk of change. Are you surprised to see it be that high?
We know that a typical college graduate coming out of a four-year institution is already borrowing around $30,000. But we also know that, when we use words like typical, we often are really talking about an average white student. They may be borrowing $30,000, but they may have a little bit more family income to help pay for higher education.
We know that a Black college student is not only more likely to borrow more, but they’re more likely to actually send money back home rather than receive money for higher education.
That big growth that we saw, to $50,000, is also because they know that realizing that a bachelor’s for us is just not enough to get that high quality, well-paying job that we were promised, you know, after we worked hard.
And we know that enrollment in graduate school for black borrowers often is at for-profit institutions, which are more expensive, with lower outcomes. And so all of these things come together to create kind of this entanglement of crisis because we’re navigating a stratified higher ed system, in a stratified labor market. So before we ever sign off for a student loan, we’re already in this reality, where we’re going to have to borrow more, and have a much higher hill to climb when it comes to repayment.
Your study also notes that Black workers need a professional degree to outearn white workers with a bachelor’s degree. It seems like a lot of Black Americans are being put in this position where they’re stuck between a rock and a hard place.
I describe it as a “damned if you do, damned if you don’t” situation. You’re understanding that there’s all these different aspects of just the Black experience that will bring you into collision with discrimination, with marginalized opportunity. But you also understand that if you want to have mobility, if you want to have financial stability, that you have to kind of gamble at some of these things. And that’s why we sometimes see Black borrowers going back to graduate school or going to a for-profit school to try to get a quicker credential because they’re trying to figure out, “How do I navigate economic insecurity or precarity?” And that requires sometimes to just really have to take gambles on higher ed opportunities because that’s how it’s been structured.
So, of course, many students and many people would prefer to go to an institution that they know that they’re going to get their return on their degree when they invest all this money through student debt. But that’s not the reality where that type of confidence is there, particularly for Black borrowers who are more likely to have for-profit institutions in their communities, they’re more likely to be intentionally targeted by the institutions. And then they’re more likely to enter a labor market where, again, their credentials aren’t translated in the same way as their white counterparts.
Your study states that Black people are already 20% more likely than white people to experience serious psychological distress due to racism, economic distress, and a host of other societal factors. And now we’ve got the mental health toll from this enormous debt. How does that add to that mental health toll?
We should definitely understand student loans, and a larger conversation of mental health, and just larger economic anxieties that are taking place, particularly right now in a moment where we’re still in a pandemic.
You can think of, just in the last three years of this pandemic, the amount of stress that someone is under where you enter a pandemic, you’re not sure if you’re going to have your job, you’re not sure if you’re going to have your health, but you’re still having this payment being extracted. Then the payment is paused. And every six, eight months, the administration is telling us the loans are coming back. So now you have this new stressor because you’re trying to figure out how to work this payment back into my budget because things are getting more expensive, increased child care costs. And people are having to make choices between taking care of themselves, and paying student debt. And that’s a really stressful place to be in.
Many borrowers are experiencing suicidal ideation because of having to make the choices between the student debt that I took on that was supposed to actually benefit me. But now it’s caused me to make choices about child care, food costs, and everyday life planning. And that is a real mental health toll that I always emphasize: having to carry this weight of not knowing how you will ever pay off this debt.
Some recommendations your study suggests for helping with the Black student loan debt crisis includes total broad-based debt cancellation and making improvements to income-driven repayment plans. However, we aren’t really sure if we’ll see any of these policies happen. What do you foresee happening to Black Americans if the payment freeze does end on Aug. 31?
This has been something that’s been on the table several times now throughout the pandemic. And one thing I like to emphasize is that any wins or changes that we have seen with student loans, at least in the last four years, has been really because of a very strong student debt movement where borrowers and advocates have really worked hard to make it clear that student borrowers need relief and that turning on student loans will have serious consequences.
So it’s very possible that we may get another extension, but without that extension, I think you’re dealing with a situation where Black borrowers are going to really face some of the worst consequences of student loans. That’s what we’re facing: Back borrowers are going to see that they’re not able to make this payment. That it’s not in their budget anymore, because again, everything’s gotten so much more expensive since we turned these loans off.
And it’s something that many people, rightfully so, haven’t been planning on because they also have been promised, at the same time, that some debt cancellation is coming. So we have a Biden administration that promised, on the campaign trail, that at least $10,000 is gonna be canceled. That hasn’t happened.
So there has been multiple messaging, both from Biden as president-elect and the Biden administration. Many people were really counting on the debt cancellation to be a part of their financial planning. And to turn student loans back on, without any of those promises, is something that we can’t really blame the borrower for not being prepared for.
So hopefully student loans continue to be paused, and that we continue to advocate and push the Biden administration to understand what consequences, particularly for Black borrowers, could take place if the student loans are turned back on in the middle of a pandemic, and in the middle of higher inflation.