Giving Compass' Take:

• Matthew Chingos explains how racial wealth gaps impact students' borrowing and repayment ability and should be considered in student loan policy. 

• How can funders help to create and support equitable student loan policies? What help do students of color need to successfully navigate the student loan process? 

• Learn more about racial gaps in student loan default. 

Racial and ethnic disparities in wealth are well documented, with 2016 data showing the median white family having nearly 10 times as much wealth as the median black family. (The gap between white and Hispanic families is similar in size.) This means students of color tend to have fewer family assets to draw on for college, often leading them to choose between attending lower-priced institutions or taking on more debt. After leaving college, students of color are less likely to be able to lean on family members for financial support that might ease the burden of loan repayment.

Higher education policy research tends to focus more on income than wealth, not because income is more important, but because it is easier to measure. The quadrennial National Postsecondary Student Aid Survey collects income data on a nationally representative group of college students, but it only collects limited information on wealth.

The available data indicate income is a poor proxy for wealth, especially for black and Hispanic families. The typical low-income family has less than $10,000 in net worth, regardless of race or ethnicity. But racial and ethnic disparities in wealth grow with income, as the figure below shows. The typical middle-income white family has roughly three times the wealth of the typical middle-income black or Hispanic family.

How wealth gaps translate into student borrowing is not uniform across groups. Black students are more likely to borrow than white students in every income group. (Average amounts among borrowers are similar, at around $6,000.) And these data likely understate black-white differences in education debt, as they only capture borrowing in a single year.

Read the full article about student loan policy and racial gaps by Matthew Chingos at Urban Institute.