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Who is most affected by the student loan debt crisis?

By Brian Soika Published on

As the student loan debt crisis worsens, formidable gaps between borrowers persist.

Approximately 45 million Americans owe money for higher education, with a total balance of around $1.7 trillion. These numbers represent an increasing trend year-over-year.

Economists project that debt of this size has significant short- and long-term consequences. The effects range from low credit scores to harmful delinquencies and diminished Gross Domestic Product (GDP). 

But while a large portion of the population has student loans, their burden is felt more acutely by some than others, revealing issues of racial and gender inequity, and income inequality. 

The inequities of student loan debt

The majority of all student loan debt is held by people with relatively high incomes. 

Low-income households have less debt overall, but a high percentage of borrowers from this group have associate’s degrees or less, limiting their earnings potential.

A college degree has been shown to improve one’s earning potential, but the benefit is not shared equally among race and gender. These data points show some of the ways in which student loan debt is partially responsible. 

  • Women hold the majority of student loan debt1
  • Black and Latinx borrowers take on more debt to finance higher education2
  • Black and African American college graduates owe an average of $25,000 more in student debt than White college graduates3
  • Four years after graduation, 48% of Black students owe an average of 12.5 percent more than they borrowed4

Total vs. partial debt cancellation

Some politicians and activists have advocated for total student loan debt cancellation by the federal government. 

This would indeed provide relief for borrowers hit hardest by debt. However, it would also let higher-income individuals with means, the group owing the most money, off the hook. 

President Biden and other economists have suggested a more targeted approach would be better, as it gives help to those with the greatest need. This could include relief based on income or through the expansion of existing federal loan forgiveness programs. 

Steps institutions can take

While debt cancellation may provide relief, it doesn’t solve the bigger problem: The high cost of higher education. 

The rising cost of college is due in part to a decline in public funding and increased demand. However, it has also been attributed to questionable institutional costs that are passed on to students. 

The University of Southern California has pledged to make attendance tuition-free for students whose families earn less than $80,000 per year. Nationwide, institutions ranging from elite schools to community colleges have created similar policies, although reduced or free tuition may be less helpful than it sounds.

Other steps for institutions that want to alleviate student loan burdens may include increased financial aid counseling. Investment in student retention can also help boost graduation rates, and therefore improve students’ earning potential. 


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