The Student-Debt Crisis Hits Hardest at Historically Black Colleges

Long a path to financial security, traditionally African-American schools are now producing graduates who struggle with disproportionately high debt

Historically black colleges and universities helped lift generations of African-Americans to economic security. Now, attendance has become a financial drag on many of their young graduates, members of a new generation hit particularly hard by the student-debt crisis.

Students of these institutions, known as HBCUs, are leaving with disproportionately high loans compared with their peers at other schools, a Wall Street Journal analysis of Education Department data found, and are less likely to repay those loans than they were a decade ago.

Among key findings of the Journal’s examination of 2017 data, the latest available:

  • HBCU alumni have a median federal-debt load of about $29,000 at graduation—32% above graduates of other public and nonprofit four-year schools.
  • The majority of HBCU grads haven’t paid down even $1 of their original loan balance in the first few years out of school.
  • America’s 82 four-year HBCUs make up 5% of four-year institutions, but more than 50% of the 100 schools with the lowest three-year student-loan repayment rates.

Though HBCUs typically cost less than other public and nonprofit four-year schools, these colleges have long trailed those peers on measures of debt and repayment. Now they are trailing by far greater margins.

Many HBCUs see a mandate in giving opportunity to disadvantaged youth, who often start out with fewer financial resources and a diminished ability to pay.

At Stillman College in Tuscaloosa, Ala., the board until recently included alumni from rural Alabama working as lawyers, doctors and ministers, said its president, Cynthia Warrick. “They’ve told me that no one else would take them but Stillman. I think we have a responsibility to still be that place.”

Graduates of four-year for-profit colleges, which weren’t part of the Journal’s comparisons, have similar overall repayment rates and median debt loads to HBCU alumni, an analysis of federal data shows.

The HBCU debt gap has widened partly because of simple math. Tuition increases have outstripped inflation across America.

  • Black families have the least wealth of the largest U.S. racial groups, Federal Reserve data show.
  • Parents of black college students have lower incomes and are less likely to own homes than those from other racial groups, Education Department data show.

So in coping with tuition increases, black students have fewer resources to draw on than many Americans. Borrowing proportionally more has been the solution for many black students and families.

.. Blacks typically earn less than whites after college, so they have fewer resources to repay. Black college graduates between ages 21 and 24 earned nearly 17% less per hour, on average, than white graduates of the same age range in 2018, according to an analysis of census data by the Economic Policy Institute, a left-leaning think tank.

.. Many HBCUs opened after the Civil War and in the first half of the 20th century when public and private universities often denied admission to African-American students. The schools often started out severely behind their peers financially. Many never caught up, despite government efforts that the schools say have been insufficient.

The Fleecing of Millennials

Their incomes are flat. Their wealth is down. And Washington is aggravating future threats.

For Americans under the age of 40, the 21st century has resembled one long recession.

I realize that may sound like an exaggeration, given that the economy has now been growing for almost a decade. But the truth is that younger Americans have not benefited much.

Look at incomes, for starters. People between the ages of 25 and 34 were earning slightly less in 2017 than people in that same age group had been in 2000:

 

The wealth trends look even worse. Since the century’s start, median net worth has plummeted for every age group under 55:

.. Why is this happening? The main reason is a lack of economic dynamism. Not as many new companies have been forming since 2000 — for reasons that experts don’t totally understand — and existing companies have been expanding at a slower rate. (The pace of job cuts has also fallen, which is why the unemployment rate has stayed low.) Rather than starting new projects, companies are sitting on big piles of cash or distributing it to their shareholders.

This loss of dynamism hurts millennials and the younger Generation Z, even as baby boomers are often doing O.K. Because the layoff rate has declined since 2000, most older workers have been able to hold on to their jobs. For those who are retired, their income — through a combination of Social Security and 401(k)’s — still outpaces inflation on average.

But many younger workers are struggling to launch themselves into good-paying careers. They then lack the money to buy a first home or begin investing in the stock market. Yes, older workers face their own challenges, like age discrimination. Over all, though, the generational gap in both income and wealth is growing.

Given these trends, you’d think the government would be trying to help the young. But it’s not. If anything, federal and state policy is going in the other direction. Medicare and Social Security have been spared from cuts. Programs that benefit younger workers and families have not.

.. The biggest example is higher education. Over the past decade, states have cut college funding by an average of 16 percent per student. It’s a shocking form of economic myopia. In response, tuition has risen, and students have taken on more debt. Worst of all, many students attend colleges with high dropout rates and end up with debt but no degree.

And as badly as the government is treating the young today, the future looks even more ominous.

First, the national debt, while manageable now, is on pace to soar. The primary cause is the cost of health care: Most Americans receive far more in Medicare benefits than they paid in Medicare taxes. The Trump tax cut also plays a role. It is increasing the debt — and it mostly benefits older, affluent households.