News: Data, Research & Evaluation

Black Borrowers' Student Loan Default Rates Remain High, Despite Income-Driven Repayment

Monday, December 16, 2019  
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By Janai Raphael, Graduate Assistant for Research & Data Analysis

The Center American Progress (CAP), a progressive think tank, released a new analysis on student loan default rate trends, which historically have been bleak for Black borrowers. Using the most recent data from the Beginning Postsecondary Students Longitudinal Study, CAP’s analysis focuses on students who began college during the 2011-12 academic year and entered repayment by 2017. Sadly, the new results show that Black borrowers still face the highest defaults among all student groups.

These findings are particularly striking because they include students who have only had access to the updated income-driven repayment (IDR) plans since leaving school. These more generous plans were developed by Congress to help struggling borrowers and cap monthly student loan payments at a fixed share of a borrower’s income.

Other interesting findings from CAP’s analysis include

  • Black students attending private, for-profit institutions were the most likely to default on their student loans. Forty-two percent of these students defaulted, compared to 33% of White and 31% of Latino students at for-profit colleges.
  • Over 40% of all students who borrowed but did not earn a credential defaulted on their loans. Looking only at Black noncompleters, the default rate increases to 55%.
  • Students who earned a certificate or degree were more likely to use IDR than noncompleters. Thirty-four percent of Black borrowers with a bachelor’s degree used IDR, compared to 15% of Black noncompleters.
  • Borrowers who used IDR were less likely to default on their loans. Among borrowers who did not earn a credential, 21% of nondefaulters used IDR, compared to 7% of defaulters.
  • Nearly half of all borrowers and 59% of Black borrowers who are using IDR have a monthly payment of $0.

These findings highlight the persistent racial disparities in default rates among borrowers, particularly at the detriment of Black borrowers. The findings also show that IDR is an effective yet incomplete solution to these disparities.