New Federal Reserve Bank of New York Study Examines Student Debt by Race

A new report from the Federal Reserve Bank of New York examines data on college enrollments, student debt, and loan default rates in zip codes that are majority White or majority Black.

Using the Census Bureau’s American Community Survey data for 2012-16, researchers designated which zip codes were majority Black, majority Hispanic, or majority White. They defined majority-Black zip codes as those where non-Hispanic Black individuals make up at least 50 percent of the adult population. For data on student debt, researchers used the New York Fed Consumer Credit Panel that consists of anonymized consumer credit records sourced from the Equifax credit bureau. For college enrollment data, the report uses statistics from the National Student Clearinghouse.

The report found that in majority-White zip codes, 64 percent of 30-year-olds with a credit report had attended some kind of postsecondary education; of that total, 15 percent had attended a two-year institution and 49 percent had attended a four-year institution. Black areas lagged behind those in majority-White zip codes in four-year college attendance.

Individuals who attended college and lived in majority-Black neighborhoods were more likely to borrow than those in majority-White areas. Four-year attendees in majority-Black neighborhoods were 9 percent more likely to have a student loan by age 30 than their counterparts in majority-White areas. Borrowers in majority Black areas carry higher debt balances than borrowers in majority-Hispanic or majority-White zip codes.

Overall, borrowers living in majority-Black and majority-Hispanic zip codes are much more likely to default on student debt by age 30. Two-year college borrowers in majority Black areas default at 1.9 times the rate of those in majority-White areas. The ratios of default rates among four-year borrowers are very similar.

The authors conclude that “individuals in majority-Black and majority-Hispanic areas have lower college attendance rates than those in majority-White areas. Black areas have a markedly higher propensity to take out student loans and students from majority-Black and majority-Hispanic areas have a considerably higher propensity to default on those debts. “


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