Eleanor Tyson, 22, is from Winston-Salem and is a public policy master’s student at UNC Chapel Hill. She’ll be taking out a loan to go to school, adding to her current student debt. As a freshman, Tyson said she didn’t know much about student loans or high interest rates. Now she’s worried about how all this debt will affect her future and that of her family.
“This is going to impact me for a long time,” Tyson said.
To pay for graduate school, Tyson said she weighed private versus public loans and worried over the best option.
“I did so much research, and it was so overwhelming. I was like: ‘I just want to cry, but I know I have to get it done,’” she said.
Thinking about her debt and how it limits her choices is stressful. To make things even more stressful, Tyson has to start repaying some of her loans in October, when the pause on student loan payments ends.
She’s not alone; many North Carolinians are worried about making payments in the fall. North Carolina is 10th in the nation for the highest student loan debt per capita. That burden is even heavier for Black women, who have the highest average total of undergraduate and graduate student loan debt, according to a report by Manpower Development Corp., or MDC, a North Carolina-based nonprofit that supports capacity building and economic development in the South.
Tyson, a biracial woman, realized the connection between her identity and student debt when she began working at MDC as a program associate. She discovered through her work with MDC’s North Carolina Student Debt Coalition that people of color are more impacted by student debt.
MDC’s report on debt and social mobility in the South states that women hold 65% of student loan debt. On average, Black women accumulate $30,400 in debt from undergraduate study, whereas white women carry $22,000. This problem has grown dramatically worse over time. According to the Education Data Initiative, the average student loan debt at graduation has increased almost 70% from 2004-20.
Student loan debt racial disparities
Jenna Bryant, former program director at MDC and now a caregiver in Durham, said that as a Black woman, she’s affected by the wage gap, making it harder to pay back those loans. The MDC report states that at the highest education levels, African Americans and Latinos could earn almost $1 million less than their white and Asian counterparts over a lifetime.
Another reason Black women often hold more student debt is that they’re often caregivers for relatives or children of their own, Bryant said. A 2002 study by Gallup and Lumina Foundation found that 22% of Black students identified as caregivers, as opposed to 11% of other students. Bryant said that makes it difficult to get a higher-paying job or put time towards schooling.
Fenaba Addo, a public policy professor at UNC Chapel Hill, said barriers to education for Black students today partly stem from historical inequalities such as racial violence and the destruction of Black wealth.
Addo found in her research that racial inequalities in student debt play a role in the Black-white wealth gap in early adulthood. She said one factor is a lack of generational wealth in many Black families.
Members of the Black middle class tend to be less wealthy than members of the white middle class, according to Addo’s research. The study stated: “More than 25% of white families have a net worth of at least $1 million or more; only 4% of Black families meet that standard.” Assuming households with a net worth between $100,000 and $500,000 are viewed as “solidly” middle class, the study stated that in 2016, out of all the households that met those criteria, 73% were white, and 10% were Black.
History also plays an important role in understanding generational wealth gaps between Black people and white people. As Addo explained, events in North Carolina’s history stripped wealth away from Black people, such as the 1898 massacre in Wilmington, where white supremacists killed what could be tens to hundreds of Black people.
“We’ve had a history of race riots here, with the massacre in Wilmington, all these things that have been shown to either stolen wealth or taken wealth away,” she said. “Even downtown Durham, which used to have its own Black Wall Street, and it’s not really there anymore. So, these ways in which it’s been very difficult over time to maintain a Black middle class is something North Carolina’s not immune to.”
Racial violence that made it hard for Black families to acquire wealth and keep it creates the lack of parental wealth for Black students today, Addo said.
The South’s history of racial and social exclusion, as well as disinvestment, means young Southerners face multiple barriers to higher education and jobs, according to MDC’s report on debt and social mobility. MDC stated that those born in the South have the lowest odds of upward economic mobility in the U.S. Unfair systems make it even more difficult to move up, keeping families stuck in poverty over time.
Striking down of Biden administration’s loan forgiveness plan
On June 30 of this year, the Supreme Court struck down the Biden administration’s student loan forgiveness plan. The plan was supposed to forgive between $10,000 and $20,000 of student loan debt, depending on income. But the Supreme Court ruled that the Biden administration did not have the authority to do so. In North Carolina, more than 1.3 million residents are federal student loan borrowers, according to the News & Observer.
A new income-driven repayment plan relief could forgive student loans for nearly 25,000 North Carolinians, according to reporting from WRAL.
Conservative groups are suing that plan as well, according to the Washington Post. Still, the Saving on a Valuable Education, or SAVE plan, from the Biden administration is another new income-driven repayment plan that will help expand options for people to pay less depending on their income.
Tyson said she was hoping the Supreme Court would decide differently but is tentatively hopeful about other plans for relief.
For her, following the legal battles over relief “feels like whiplash.”
Racial equity in student loan relief
Bryant said she had to weigh her student loans in life decisions like buying a home and when to have children. She said it even affected the way she dated. If the other person also had loans, she’d wonder whether they’d be able to handle their combined debt.
“It sort of delays everything that you think you’re supposed to do at a certain point in life,” Bryant said.
Bryant received student debt relief through the Public Service Loan Forgiveness program during the COVID-19 pandemic, which forgives student debt for employees in the public sector like teachers or firefighters. Bryant qualified because of her former work as a public employee.
Public Service Loan Forgiveness requires the borrower to make at least 120 on-time monthly payments, or 10 years’ worth. But making those payments and meeting other requirements of the PSLF can be difficult.
The PSLF program also wasn’t successful at first. NPR reported that the program had a 99% denial rate in its first year because vague information, stringent requirements, and failures from loan service providers led to widespread confusion.
To address this, PSLF had a limited waiver from October 2021 to October 2022. Bryant’s loans were forgiven at that time.
Bryant said she wouldn’t have been able to pay off her loans by retirement if it hadn’t been for PSLF. But even with the incentive of PSLF, she said people may not be able to go into public service jobs because they need higher wages.
“I’m a Black woman in the South, I’m not going to make that much money in government,” she said.
New income-driven repayment plan as potential relief
Sabrina Golling, a partnership manager with the Rural Forward program at MDC, volunteers in a large online group to support people looking for help with student loan forgiveness. She said many people are confused about their loans; financial language isn’t accessible to a lot of people, and information sources can sometimes be too generalized to help individuals.
Golling also said there aren’t many reliable sources of information that people can use to understand their student debt, and many don’t understand those resources or may be distrustful of them.
Loan services contracted by the federal government incorrectly told clients that they couldn’t consolidate their loans without resetting their payments, even during special opportunity periods offered by the department. Golling said she still sees borrowers receiving wrong information from loan servicers.
According to the National Consumer Law Center, contracted loan service providers also steered people away from income driven repayment, or IDR, plans, which would allow them to make smaller monthly payments based on income and cancel their debt after 20–25 years. Instead, providers nudged consumers into forbearance, a status whereby clients don’t have to make loan payments, but their interest continues to accumulate, the center found.
Borrowers are only supposed to use the one-time forbearance for 12 consecutive months to avoid interest capitalization, in which unpaid interest is added to their total debt. But according to the Department of Education, some providers were allowing people to stay in forbearance under IDR plans even if their balance was zero.
That led to people getting hit with larger monthly payments and a larger loan balance, the NCLC reported. And the time they had spent in forbearance didn’t count toward the 20–25 years of payments required to receive cancellation if they were under an IDR plan.
The NCLC found that Black and brown borrowers were disproportionately impacted by this, as they are more likely to end up in financial hardship because of debt.
NPR reported that the result of these flaws was that only 32 people had their loans forgiven under IDR plans as of March 2021, when 4.4 million borrowers had been repaying for at least 20 years.
Expanding options for relief
When the national political battles about forgiving student debt are settled, options for relief could increase. But accessing that support may prove difficult, especially when people are confused by conflicting and incorrect information.
Tyson still gets confused about her loans today, she said. On top of that, she said it’s hard to keep up with the ups and downs of the battles around student loan relief.
Student loan relief has been debated on the national stage. U.S. Reps. Alma Adams, D-12th District, and Deborah Ross, D-2nd District, introduced a legislative package with two other Democratic representatives that would help people repair their credit scores after defaulting on their loans.
The punitive credit score system can prevent people from owning houses or cars, Adams said. This legislation would give people a second chance, especially first-generation Black college students who don’t have generational wealth to help pay for school, she said.
The legislation hasn’t yet made it out of committee. Adams said she’s hopeful her Republican colleagues will see this as a nonpartisan issue.
As for resuming payments in the fall, Golling said, “I think it’s going to be really messy.”
Many people haven’t thought about their loans in months, she said. With the confusion from the legal battles over relief combined with payments beginning again, Golling said it’s a big emotional burden.
For Tyson, she feels like she has to decide her future based on her loans. She’s considering a career in the private sector to get a higher-paying job, something she said she’s been judged for. She also would like to move out of North Carolina but feels it would be easier to pay off her loans if she stayed.
Tyson said she admires others who are dealing with their student loans on top of other responsibilities, like being caregivers.
“I can barely manage myself and think about this,” she said. “It’s very inspiring, and I wish it didn’t have to be inspiring because I’d rather it not be a thing, right? But I just have so much respect.”
Systemic unfairness makes it so that people who are already at a disadvantage have to deal with more student debt. These same people might also have a bigger stake in the discussions about forgiving this debt in the coming months.
Golling said that for North Carolinians who are worried about their loans, the best place for reliable information is studentaid.gov.
Editor’s note: Jenna, Eleanor, and Sabrina are sources from MDC and its network; additional sources were found outside this nonprofit. CPP chose to include these sources due to MDC’s deep research on racial equity and student debt.
Resources
For those with federal student loans: https://studentaid.gov/
For learning more about the Biden administration’s SAVE plan: https://studentaid.gov/announcements-events/save-plan
For those who work in public service and have student loans: https://studentaid.gov/pslf/
For North Carolinians looking for aid with student loans:https://www.ncseaa.edu/
End notes
Darity, W., Addo, F.R. & Smith, I.Z. (2021) A subaltern middle class: The case of the missing “Black bourgeoisie” in America. Contemporary Economic Policy, 39: 494–502. https://doi.org/10.1111/coep.12476
Houle, J. N., & Addo, F. R. (2019). Racial Disparities in Student Debt and the Reproduction of the Fragile Black Middle Class. Sociology of Race and Ethnicity, 5(4), 562–577. https://doi.org/10.1177/2332649218790989
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