Gender and Racial Disparities in Student Loan Debt
Research by Fenaba R. Addo, an Institute for Economic Equity research fellow, and Xing Zhang sheds new light on student loan debt across gender and racial dimensions. An increasing share of college-going adults must take out student loans. While necessary to cover their education and associated costs, this debt is not distributed equally. Young Black women are the most likely to have student debt, and their average loan balance is the highest at $11,000. Women are more likely than men to hold debt, and men’s higher incomes allow them to pay down their debt faster than women. Black men and Black women both start out with more student debt than their white counterparts, and because of their lower earnings, they pay it down more slowly. Gender and racial disparities in student debt thus grow over time.
This St. Louis Fed working paper is unedited and represents preliminary research that is being circulated for discussion purposes. The views expressed in this paper are solely those of the authors and do not necessarily reflect the views of the Federal Reserve Bank of St. Louis or the Federal Reserve System. Any errors or omissions are the responsibility of the authors. St. Louis Fed working papers are free to download.
Higher education is meant, among other things, to improve social and economic mobility. One widely held expectation is that four-year college graduates will have better jobs than nongraduates. Research supports this assumption, as families headed by those with four-year college degrees have significantly higher incomes than families headed by those without such credentials.
However, income is just one measure of financial success. Wealth—that is, assets minus debts—is a different financial measure tied to resiliency and upward mobility. The research on education and wealth has found that the financial return from a bachelor’s degree is not as strong for younger generations as it was for older ones.
Moreover, for college-going students, debt has increasingly become critical to financing their educations. That debt may be necessary for many, but it has consequences for career decisions, marital formation and fertility. The distribution of student loan debt also has equity implications. Women are more likely than men to enroll in college and complete their degrees. However, they are also more likely to take on debt. This debt takes up a larger portion of women’s earnings, and thus they take longer to pay it off. Black adults, too, face higher average debt burdens than their white counterparts that take up a greater share of their earnings.
Women and Black Adults Have More Student Debt
Young adult women and young Black adults were more likely to have student loan debt than young adult men and young white adults, respectively. Gaps in average debt also grew as these young adults aged. The analysis in the working paper used the 1997 cohort of the National Longitudinal Survey of Youth to explore student debt outcomes for people who enrolled in postsecondary education. It examined student loan debt from all sources, including formal borrowing from the government and private debt, but also informal borrowing from family and friends. Debt was measured when the respondents were between the ages of 20 and 35—points in one’s career when the steepest earnings growth occurs.
Overall, 44% of the sample (with an average age of 26) had student loan debt. Women (47%) were more likely than men (40%) to have student debt. Black adults (50%) were more likely than white adults (44%) and Hispanic/Latino adults (37%) to have student debt. The same patterns appeared with average debt levels; women ($9,400) had higher student debt levels than men ($7,700), and Black adults ($9,800) had more student debt than white adults ($8,700) and Hispanic/Latino adults ($7,000). In part, this is because those groups were more likely to have debt. When people without student debt were excluded, average balances more than doubled, but differences between groups shrank.
Men and White Adults Pay Down Debt Faster
While differences measured at a specific point are important, how debt gaps change over time is also informative. The gap between men and women grows over time because men are able to pay down their debt more quickly. The gender disparity in student debt grows 3% per year, with men paying down their debt at a rate of 11% compared with a rate of 8% for women.
Looking within race, Black women and Black men had higher student debt on average than white women and white men, respectively (see the figure below). Within gender, Black women and white women had higher student debt on average than Black men and white men, respectively. Even after taking baseline differences into account, being a Black woman was associated with greater student debt. These gaps grow over time, with Black women paying off their debt more slowly than white women and Black men.
Student Debt by Gender and Race
SOURCES: Addo and Zhang’s calculations based on the National Longitudinal Survey of Youth.
NOTES: The figure reflects student debt data for adults ages 20-35. Average student debt is taken across the entire group, including those without any student debt.
Why Are Women and Black Adults More Likely to Have Student Debt?
Young adult women are more likely to enroll in and graduate from higher education institutions. They also leave college with higher student debt levels and take longer to pay off that debt. In part, this is because of the gender wage gap—female-dominated occupations pay lower wages—and gender discrimination in the labor market. Furthermore, parents put away more in college savings for sons than for daughters.
In addition, Black adults face a racial wage gap with white adults and encounter racial discrimination in the labor market. Black parents are less likely to have college savings for their children and less saved when they do, in large part because of the substantial racial wealth gap. Black adults were also more likely to attend for-profit institutions and remain in school for more years than white adults. Both factors are related to higher debt levels.
Black women are the most likely to have student debt, and they have the highest average debt levels. They experience both gender and racial wage disparities, earning 94 cents for every dollar Black men make, 84 cents for every dollar white women make, and 63 cents for every dollar white men make. They also contend with the racial wealth gap (PDF). Pursuing college degrees for Black women means accumulating more debt with lower earnings in the labor market to assist with paying it back.
Reducing Debt Disparities as a Path Forward
Given that college can serve as a pathway to a more secure financial future and other positive outcomes, it is important to understand how and why experiences vary by race and gender. Loan-based financial aid is a necessary way to finance higher education for many. Accumulating significant debt that is difficult to repay reduces the economic return of a college degree among economically vulnerable borrowers, who are more likely to be women and Black adults. The potentially widespread effect of reducing educational debt disparities is a fruitful avenue for future research.