Racial Disparities in Student Loan Debt and the Reproduction of the Fragile Black Middle Class

Houle, Jason, and Fenaba Addo
Working paper no. 2018-02


Policy makers and scholars express concern about rising levels of student debt in the U.S. But surprisingly little of this conversation recognizes that debt is racialized, and disproportionately impacts youth of color, especially black youth. In this study, we expand on recent research on racial disparities in student debt, and ask whether black-white disparities in debt persist, decline, or increase across the early adult life course, examine possible mechanisms for racial disparities in student debt across early adulthood, and ask whether racial disparities in student debt contribute to black-white wealth inequality among a recent cohort of college-going young adults. We address these questions using nationally representative data from the National Longitudinal Study of Youth-1997, multilevel growth curve models, and linear decomposition methods. We have three key findings. First, we find that black-white disparities in debt increase across the early adult life course, and that previous research underestimates racial disparities in debt. Second, this racial disparity is partially explained by differences in the social background, postsecondary experiences, and disparities in attained social and economic status of black and white young adults. Third, we find that—compositionally—racial inequalities in student debt account for a substantial minority of the black-white wealth gap in early adulthood, and that this contribution increases across the early adult life course. We conclude that debt trajectories are more informative than point-in-time estimates, and that student debt may be a new mechanism of inequality that creates fragility in the next generation of the black middle class.