Christelle Bamona, researcher at CRL

WASHINGTON, DC — The high burden of student loan debt limits the future financial options of graduates of Historically Black Colleges and Universities (HBCU) and breaks the promise of a college education as a great equalizer, according to a new research report published today by the Center for Responsible Lending (CRL).

The report, “Paying from the Grave,” highlights the impacts of systemic racism on wealth accumulation for families and unequal resource distribution among institutions. The research finds that student debt prevents many HBCU graduates from engaging in wealth-building activities like purchasing a home or investing in retirement, which contributes to the black-white wealth gap. Graduates of HBCUs have an average debt load of $32,373 after graduation – 19% higher than peers at non-HBCUs.

“HBCU students receive less institutional aid and are more likely to take out loans than their peers at non-HBCU institutions,” said Christelle Bamona, researcher at CRL and co-author of the report. “While President Biden’s recent historic student loan relief plan will benefit millions of federal student loan borrowers, including HBCU borrowers, policymakers must now work to reverse the systemic underfunding of HBCUs and increase the purchasing power of the Pell Grant, among other reformative measures.”

While this new research – conducted before the Biden administration’s loan forgiveness announcement – shows that the payment pause on federal student loans provided much-needed relief for HBCU alumni’s financial circumstances, it also raises concerns about the impact of resumption of payments next year.  

“Our research also showed that the payment pause played an important role in borrowers’ finances and mental health,” said Lucia Constantine, researcher at CRL and co-author of the report. “The payment pause enabled 85 percent of HBCU students to make at least one positive, wealth-promoting financial choice, such as starting or building emergency savings and paying other debts. Borrowers also reported being better positioned to achieve long-term goals like homeownership, pursuing further education or starting a business.”

“The last 26 months or so that we’ve been on this pause, I did not realize how much I would be able to save, pay off other debts because I don’t have to put that money towards student loans,” said a focus group participant. “So, I have zero credit card debt as a result of not having to pay the student loans. I owe no man nothing. And it’s just the federal government piece that I still owe.”

Key findings of the report reveal:

Skyrocketing college costs and historic underfunding of HBCUs force a disproportionate share of low-income and first-generation students to take on a huge student debt burden;

Student debt limits career choice and complicates homeownership for HBCU alums, which contributes to the racial wealth gap;

Student loan repayment program rules and unresponsive servicers are unnecessarily confusing and challenging to navigate; and

The pause on federal student loan payments has provided much-needed relief to borrowers; resuming payments will create additional challenges.    

Policy recommendations include waiving state tax on student loan cancellation; restoring limitations on collections for federal and private student loans; holding predatory student loan servicers accountable; doubling the Pell Grant program and addressing institutional funding disparities by investing in HBCUs to increase grants and scholarships that would help lower students’ debt burdens.