A few weeks back, the Washington Center for Equitable Growth (WCEG) continued its geographic study of student-loan debt, this time focusing on debtors’ races. Because of the fraught path to discharging student loans in bankruptcy, falling behind on loan payments can disqualify debtors from helpful protections like income-based repayment programs. Consequently, when the WCEG found that minorities—particularly middle-income ones—are especially vulnerable to student-loan delinquency, its findings are worth taking seriously.
Using data from the credit reporting agency Experian and the Census Bureau’s American Community Survey, WCEG researchers found that the higher the concentration of minorities in a zip code, the higher its student-loan delinquency rate. The authors then attempted to separate income effects from their results by grouping zip codes by median income and then comparing them by their racial characteristics. Oddly, they found that at low incomes, the more minorities made up the zip code’s population, the lower the delinquency rate. By contrast, in middle-income zip codes, $60,000 annually, the delinquency rate increased along with minority populations.
Somewhat provocatively, the researchers offered “structural racism” as the cause for their findings. One, minority students are less likely to complete college and are more likely to enroll in for-profit universities that aren’t well regarded. Two, minorities suffer substantial discrimination in the labor market, e.g. fewer interviews and call-backs despite their educations, and diminished earnings nonetheless. Finally, minorities have less wealth that white households do, meaning minorities aren’t as insulated from debt problems. Meanwhile, poorer minorities lack the resources to attend college in the first place, so they don’t accumulate student-loan debt.
The WCEG authors drearily conclude that “debt-financed higher education is not the solution, and may even be contributing to the problem” of minorities’ poor outcomes.
The WCEG’s research can be found here.
Nationally, student-loan delinquency is at 11.5 percent, according to the Federal Reserve Bank of New York. It spiked from about 9 percent in mid-2012 for reasons that appear unclear. Meanwhile, all other forms of credit delinquency have declined, though not all to pre-recession levels. As a result, it’s not uncommon for debtors to face difficulties repaying their student loans. Aside from income-based repayment options for federal loans, consulting with an experienced New York bankruptcy lawyer can help you evaluate whether filing a chapter 7 bankruptcy will free income for student-loan payments.
For answers to more questions about bankruptcy, the automatic stay, effective strategies for dealing with foreclosure, and protecting your assets in bankruptcy please feel free to contact experienced Brooklyn bankruptcy attorney Bruce Weiner for a free initial consultation.
