CHARLOTTE, N.C. — Whether it’s buying a home, saving for retirement or starting a business, student debt makes it difficult for graduates of historically Black colleges and universities to build wealth after college, a new report shows.
The report, from the Durham-based Center for Responsible Lending, evaluated polling, focus group and public education data to gauge the impact of heavy debt burdens — and relief from them, via the federal pause on student loan payments — on HBCU graduates.
The nearly three-year pause on federal loan payments is set to expire in January. It’s been much needed relief for student borrowers, researchers wrote. But they also found that rising college costs, HBCU under-funding and systemic economic gaps are forcing HBCU students to take on a disproportionate amount of debt, compared to non-HBCU students.
That’s keeping many graduates from adding to their net worth later in life, the report states.
“It’s obvious that carrying student debt makes it difficult to engage in wealth building activities,” Christelle Bamona, a researcher at the center, told The Charlotte Observer. “That contributes to the racial wealth gap.”
The trend also is happening in North Carolina. The state’s largest HBCUs have higher median debt burdens and higher median monthly payments than several other N.C. colleges, such as UNC Charlotte, Davidson or UNC Chapel Hill, an Observer analysis of federal education data found.
“Student debt,” Bamona added, “is a racial justice issue.”
How does student debt affect HBCU students?
The majority of America’s HBCUs were founded after the Civil War, the center’s report said. They were designed to be academic havens and provide higher education opportunities for Black students unwelcome at established white public and private institutions.
With Title III of the Higher Education Act of 1965, Congress elevated HBCUs as schools of higher learning that were accredited and established before 1964, and whose principal mission was the education of Black Americans.
HBCUs now enroll more than 280,000 people, or about 9% of all Black college students in the U.S., the report states. North Carolina has 11 such schools, including Johnson C. Smith University in Charlotte’s historic West End.
But, because of gaps in federal and state funding, many HBCUs have fewer resources when it comes to providing financial aid.
The average HBCU borrower has about $32,000 in student debt after graduation, Bamona said, which is a bit higher than the average for all U.S. students.
But such loan balances can be a significant challenge for students who may already be a step behind when it comes to building wealth, said Jacob Channel, a senior economist at Charlotte-based LendingTree.
“Depending on how much debt you take out, it can be a significant hamper to your ability to save money,” he said.
Student debt disparities at historically Black colleges and universities are primarily driven by longstanding racial inequalities in the U.S., Channel said.
“It has less to do with colleges themselves, and more to do with how these financial issues break down demographically, within the United States,” he said. “A lot of it, frankly, has to do with the historical legacies of racism in this country.”
For example, Channel said, you’re less likely to have access to inter-generational wealth when your grandparents were legally discriminated against in the real estate market.
Because of this, “many Black borrowers and many HBCU students and their families lack the wealth and assets to pay for college out of pocket,” Channel said. “They have to turn to student loans.”
The center’s report also noted that 70% of HBCU students in the U.S. receive Pell Grants — federal funds provided to college students with exceptional financial need that don’t need to be paid back. HBCUs also have a higher percentage of first-generation and low-income students than non-HBCUs, researchers found.
That’s the case at Johnson C. Smith University in Charlotte, where many students are the first in their family to enroll in college and 65% receive Pell Grants, admissions director Hamilton Raymond told the Observer.
“It’s not something students are prepared for,” he said.
What does HBCU student debt look like in NC?
Researchers at the Durham center noted that large debts prevented HBCU focus group members in the study from pursuing opportunities like buying property, making a career change or pursuing more advanced degrees.
That’s not uncommon for borrowers with significant debts, Channel said. “If you’re walking around with $30,000 to $40,000 in debt, it makes it harder to (save enough to) qualify for a loan like a mortgage.”
North Carolinians carry a significant share of the country’s $1.75 trillion student debt burden — the state ranks seventh in the country for total student loan balances, according to website Student Loan Hero.
An informal Observer analysis of federal College Scorecard data found that the state’s five largest HBCUs have higher median debt levels and higher monthly payments than predominantly white institutions like Duke University, UNC Chapel Hill and UNC Charlotte.
North Carolina’s five largest HBCUs include North Carolina Agricultural and Technical University – the country’s largest HBCU by enrollment— as well as North Carolina Central University, Fayetteville State University, Winston-Salem State and Elizabeth City State University.
NC A&T’s median total student loan debt for its graduates was $27,000, for instance, while UNC Chapel Hill’s was $14,500, according to U.S. Department of Education data.
JCSU also had higher median student loan debt than the non-HBCU colleges, at $31,000, and was well over student debt levels for other private schools like Davidson and Duke, at $19,500 and $13,500, respectively.
Median monthly loan payments for alumni were also higher for the five N.C. HBCUs, the Observer’s analysis found. That’s despite several of those schools have similar or significantly lower average costs of attendance than the other colleges.
For example, the median monthly debt payment for an Elizabeth City State University graduate is $230, according to the school’s college scorecard. That’s based on a 10-year repayment plan, at an interest rate of 3.73%.
That’s about the same as UNC Charlotte’s — even though ECSU’s average annual cost is $3,704, while UNC Charlotte’s is over $17,000. That average cost includes tuition and living expenses, minus grants and scholarships received.
Will Biden’s student loan plan close the gap?
President Joe Biden’s student debt forgiveness plan is a historic step in the right direction, Bamona said. It’ll benefit millions, she said, but it wouldn’t be enough to fully address the impact of student debt for HBCU alumni or other college graduates of color.
“The plan won’t solve the root of the problem,” she said.
That’s if the forgiveness program can proceed as planned. Biden’s executive action is facing numerous legal challenges: The U.S. Court of Appeals for the 8th Circuit temporarily stopped the program from moving forward last month in response to a lawsuit from six GOP-led states. And just last week, a federal judge in North Texas ruled the plan unlawful, although the administration will appeal the ruling.
Still, many HBCU students will benefit from Biden’s plan if it survives legal setbacks. At historically Black universities in N.C., there are larger proportions of students with federal loan balances, meaning more will qualify for partial cancellation.
Under the plan, federal student loan borrowers can get up to $10,000 of their debt forgiven. Pell Grant recipients who also took out federal loans can get up to $20,000 wiped away.
But that wouldn’t cover the average HBCU borrower’s debt, Bamona said. The president’s plan won’t offer complete relief — and it doesn’t address systemic issues like the wealth gap or the rising cost of college in N.C. and elsewhere.
“When the payment pause expires in 2023, a lot of borrowers will be struggling,” Bamona said. “There’s still more work to do.”
At Johnson C. Smith, a significant investment from the community — $80 million in donations from the Mayor’s Racial Equity Initiative — has allowed the school to offer millions more in scholarships and financial aid, admissions director Raymond said, shrinking loan burdens for students and graduates.
“We’re committed to increasing diversity. Not just with a focus on Black and brown students, but making it an (affordable) home for all that are interested in attending here,” he said.
