Another thing your zip code determines: your experience with student debt


Borrowers living within a few blocks of each other can have very different experiences with their student loans, and this large gap in results strongly matches the racial makeup of a neighborhood.

That’s the conclusion of an analysis released Monday by the Student Loan Borrower Protection Center, a nonprofit that advocates for policies that would help ease the country’s student debt crisis. The report is based on previous research by economists at the Federal Reserve’s regional banks in New York, Philadelphia, Washington, DC and San Francisco.

This adds to the already large body of evidence documenting how student debt exacerbates racial inequalities. The findings also highlight how the gap in student loan results can reinforce the financial segregation entrenched in our credit markets by decades of discriminatory policies.

“Everything you watch is credit-based – which is everything in America – black families pay a higher interest rate, they pay more for everything,” said Mehrsa Baradaran, professor at the University of California. -Irvine. Faculty of Law. “Student loans are particularly pernicious because you are only weighing down the next generation with the historic wrongs of the previous generation. “

Neighborhoods where most residents are white struggle less with student debt

SBPC’s analysis highlights the way in which these disparities operate at the district level. In Philadelphia, in the zip code that includes predominantly white neighborhoods such as Fairmount, Francisville, and Spring Garden, the ratio of median student debt to median household income is 32%. In the adjacent zip code, where 86% of residents are non-white and includes neighborhoods such as Brewerytown and Strawberry Mansion, that ratio jumps to 104%.

Across the country in San Francisco, student loan scores are also divided based on the racial makeup of neighborhoods. In predominantly white neighborhoods like South of Market and Rincon Hill, the ratio of median student debt to median household income is 12%. In neighborhoods like Tenderloin, Hayes Valley and Mid-Market, where the majority of residents are not white, that ratio is 57%.

Overall, borrowers from communities of color find it more difficult to repay their debts. In San Francisco, Philadelphia and Washington, DC, borrowers living in neighborhoods where 90% or more of residents are not white are five times more likely to fall behind on student loans than borrowers who live in majority neighborhoods White. Of the 18 New York City neighborhoods with the highest student loan collection rates, 11 are 90% non-white and only one is predominantly white.

The American History of “Jim Crow Credit”

The reasons borrowers of color, and especially black borrowers, struggle more with student debt are linked to generations of wealth inequality and discriminatory practices. Black Americans have been excluded from the white economy for centuries, then stranded from some of America’s major sources of wealth, such as owning a house, through policies such as redlining.

Because black students and their families have less wealth to tap into when paying for college, they likely have to borrow more. Additionally, students of color have historically had limited access to affluent schools that have the resources to both provide generous financial aid and help students complete their education. Finally, once students of color graduate, they risk facing well-documented discrimination in the job market, which may mean they have less money to pay off their student loans.

“The problem with Jim Crow credit is that it’s not something that requires perpetual discrimination,” said Baradaran, author of “The Color of Money: Black Banks and the Racial Wealth Gap”.

“Once you created these two different areas, that was it. That’s basically what we’re seeing right now, it’s just a fundamental consequence of those decisions. “


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