A new interactive map shows how student loan debt is holding down low-income graduates who are struggling to pay their bills.
The map was launched by Generation Progress and Higher Ed, Not Debt, which worked with the Washington Center for Equitable Growth to analyze the findings. (Disclosure: ThinkProgress is an editorially independent site affiliated with the Center for American Progress.)
Perhaps counterintuitively, the map backs up previous research that tells us graduates with high amounts of student loan debt don’t actually have the highest delinquency rates. The areas of the country with the highest delinquency rates are the ones where the amount of student loan debt is lower.
That’s because graduates and former students with less debt but high delinquency rates live in low-income zip codes, which means even small amounts of debt weigh heavily on them. Graduates with higher student debt, meanwhile, tend to live in more affluent zip codes. People who attended pricey graduate schools may have a lot of student loan debt, but they’re also more likely to have the income to pay off that debt later.
Marshall Steinbaum, a research economist with the Washington Center for Equitable Growth, explained the findings show that student debt actually reinforces economic inequality.
“’Non-traditional’ borrowers come from lower-income backgrounds and don’t actually take on high-debt burdens. They do, however, face fewer labor market opportunities, lower earnings, and ultimately much higher delinquency rates on their loans,” Steinbaum said in a statement. “Moving forward, policymakers must pay attention to the geographical distribution of student debt if they ever hope to adequately address rising inequality and the erosion of middle-class wealth.”
The delinquency rates are often higher among low-income students because many of them attend for-profit colleges, according to a recent report from the Brookings Institution. Some of the highest delinquency rates belong to students who have attended for-profit colleges, which tend to have poorer career outcomes than traditional colleges, which may invest more in providing high quality instruction and adequate support staff. Repayment rates are dismal for many of these for-profit schools; for instance, the University of Phoenix only had 1 percent of its total debt balance repaid in 2014.
In addition to having a lower income to shoulder their student debt, low-income graduates also have a lack of access to transparent, competitive markets for credit, which means they’re more likely to fall prey to exploitative creditors with higher interest rates, the Washington Center for Equitable Growth explains in its analysis.
Housing segregation, lack of access to good credit, and less overall wealth disproportionately affect communities of color, making student debt a much larger burden. When looking at income versus wealth, the racial gap in wealth is three times larger than the racial gap in income, when considering black and Hispanic families, according to a 2013 Urban Institute report.
Although white and Asian students who graduated from four-year colleges could financially weather the recession much better than their racial counterparts without the same educational attainment, the opposite was true for black and Hispanic graduates, a recent report from the Federal Reserve Bank of St. Louis shows. For black and Hispanic graduates, their median wealth actually declined more than black and Hispanic graduates who did not attain degrees from four-year colleges. According to the report, the fact that the foreclosure crisis hit predominantly black and Hispanic communities harder factored into the erosion of black and Hispanic college graduates’ wealth during the recession.