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Companies Profit As African-American Student Debt Rises

Companies Profit As African-American Student Debt Rises

By Fredrick Lee

  • HBCU students are more likely to default on loans over a 12-year period

  • Current U.S. student debt is at $1.5T

A college degree is seen as a path to the American dream, however, many students are unable to attain this goal under rising student loan debt. For African American students, having a large student debt is making it harder for them to work in their desired profession or save. At Historically Black Colleges and Universities, or commonly as HBCUs, students and their families have limited borrowing options as tuition continues to rise.

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Why This Matters: Since 2013, student debt has grown by more than 500% to the current amount of more than $1.5 trillion in the United States. A college student carries an average student loan debt of $29,000, and for African American students, their debt is higher than other college graduates. Specifically, HBCU students are more likely to default over a 12-year period, than African Americans attending other four-year colleges and universities, according to the Wall Street Journal.

For the 2017-2018 school year, parents of HBCU students borrowed an average of $14,000, 33% more than in 2000-2001. The publication noted as a result, many students had to forego savings, buying homes, or pursuing desired professions.

For the 2017-2018 school year, parents of HBCU students borrowed an average of $14,000, 33% more than in 2000-2001

As student loan debts and defaults grow, banks and private lenders like Navient (NAVI +0.63%) and Nelnet (NNI +0.38%) are seeing increased profits. These banks and private lenders handle the servicing, originating, and processing for most student loans. Nelnet’s Loan Servicing and Systems business made $112.8 million and Navient’s Federal Education Loans segment generated $147 million in Q4 of 2018. As an incentive to provide loans to students with little or no credit history, the federal government will provide more than $87 billion to these banks and private investors.

Situational Awareness: Pursuing a college degree is a big investment that can open doors to achieving the American dream, leaving many African Americans to question whether the costs outweigh the benefits. Presidential candidate Elizabeth Warren proposed an education plan that would help African-American and Latino students eliminate their student debt, perhaps getting them a little closer to making their dreams a reality.

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