Every summer a fresh wave of black college women start a new phase of their lives after high school. Many discover who they are, what their goals are, and what they want to do once they graduate. However, the student debt crisis is unfortunately still a big problem.
It can be an exciting time because college promises the ability to start earning a consistent income after graduation. Not to mention the potential for job security and general upward mobility. However, this promise is not true for everyone and the cost of attendance for college can be incredibly high.
As black women become college graduates, they're immediately thrown into different realities. The majority of them are forced to reckon with student loans.
With the economy reeling from the impact of the most recent pandemic and racial injustice at the forefront of many conversations, we cannot ignore the student loan crisis and its impact on black women.
And there has never been a more critical time to address this. But first, let's pause and go over what exactly this crisis is.
The student debt crisis: what is it?
Many dream of obtaining a bachelor’s degree or going to graduate school. Some pay for their education using a combination of grants, scholarships, and help from family. However, the majority rely on debt to pay their expenses.
In recent years, student loan debt has gone from less than 1 trillion to 1.75 trillion. And according to credit.com, the average student loan debt per person is $36,510. But what causes this debt burden?
Causes of the student debt crisis
Based on these staggering numbers, the student loan crisis arises from the fact that many Americans are taking on high debt for college but are unable to pay off their student loans.
Having trouble with payments is primarily due to the fact that average incomes have not risen at the same rate as college costs.
Tuition increases are huge, with in-state tuition jumping 175% in the last 20 years. Private institutions also saw increases of 134% in tuition costs.
In addition, student loan borrowers also have other financial obligations outside of their student loans. They may take on mortgages, further pursue higher education, or start a family. Which increases the amount of money needed to live well.
How the student debt crisis hurts black women the most
For years, black women have carried a higher-than-average burden when it comes to the student debt crisis. This has been amplified by the fact that black women are graduating from college at higher rates than previous generations.
The national statistics on the student loan crisis and its effect on Americans showcase the depth of this issue. However, the impact of the student loan debt crisis on black women surpasses the standard American experience.
According to the American Association of University Women as of 2021, on average: white men borrow $29,862 while black women borrow $37,558.
In addition, they found that women are the ones who owe 2/3 of America's nearly $1.5 trillion student loan debt, with black women carrying the highest student loan debt of any racial or ethnic group. Actually, young black women are more likely than anyone to have debt related to education.
An estimated 86.6% of black students take out federal loans to attend four-year colleges. For white students, that number drops to 59.9%.
How the wage gap compounds the student loan debt crisis for black women
After graduating, the obligation to pay off debt lingers. And this is where paths with the student debt crisis diverge notably.
According to Education Data Initiative, 4 years after completing their degree, almost half of black students owe an amount of 6% more than they originally borrowed.
But black women?
In a 12-year timeframe, they saw their loan balances actually increase by 13% on average due to the interest compounding on their debt.
The gender wage gap
While many black women go on to successfully graduate and step into corporate America's job market, they're confronted with a new challenge once they do. The gender wage gap is much wider than average for people of color.
When it comes to wages, black women make 63 cents for every dollar earned by their white male counterparts. The math for this adds up over years of work and can cost quite a bit of income.
With limited income, black women tend to fall behind their peers in paying back outstanding debt and are subject to outsized interest charges and longer repayment windows.
20 years after taking out student loans, black borrowers still owe almost all of their debt - 95% - whereas white borrowers have paid off 94% of theirs, largely due to the racial wealth gap.
Needless to say, the ability of black women to achieve financial goals like homeownership and retirement is extremely difficult. The student debt crisis is part of that.
How black women can get ahead of the student debt crisis
The high cost of the student loan debt crisis and the lack of real transparency when it comes to how the student loan system really works is important. It needs to be addressed from a government policy perspective and also by lawmakers.
Today, low-income students, predominantly from black communities, have the most student loans. The government and The Department of Education can act by increasing grants and scholarships for minority demographics and providing reasonable repayment plan options.
However, it's not just the responsibility of the government. So it also needs to be addressed from a corporate responsibility perspective especially as it relates to equal pay for women.
That being said, you can also take action with the student loan program, specifically by planning and committing to tackle your debt and keep it from becoming part of the student debt crisis. Here are some tips you can put into practice to help.
1. Learn exactly how your student loans work
It's easy to assume that your loans will work themselves out once you graduate. But nothing could be further from the truth.
Student loans come with responsibilities. There are different types of loans and terms like amortization and capitalization that may be unfamiliar. The best way to navigate the student loan process successfully is to get a good understanding of exactly how the loans work.
What are the interest rates on them? What are the monthly payments and also when are they due? Is there a possibility of student loan forgiveness?
Our resources for understanding student loans
If you're not sure where to start on this topic, we've got you covered. You can read our article on detailed student loan advice, which includes information about federal student loans, private lenders, and forgiveness programs.
Also, check out our completely free 3-course bundle on how your student loans work. The course bundle will help you understand your loans. It will also help you map out a solid plan to pay off your student debt.
2. Seek out scholarships if you are still in school to avoid the student debt crisis
One truly amazing benefit of American education is the ability to access scholarship funding and in particular scholarships for black women.
If you want to avoid the student debt crisis and student loan payments, check out these amazing diversity-focused funding opportunities. In addition to this, check the UNCF website for scholarship possibilities.
Every year, thousands of dollars in untapped funding go to waste simply because no one is applying. And this can be a great alternative to help you avoid student loans.
How this can dramatically benefit your finances
A few years ago, I was fortunate to find a scholarship program that supported students to go and study abroad for a year for their Master's education.
The dean at my college pulled me aside and encouraged me to apply. I was a bit anxious about the approval process but to my absolute surprise, I learned that no one had applied for it in the past 3 years!
The donors were beyond ecstatic to finally have someone pursue the opportunity and that scholarship covered the bulk of my education.
Make scholarships part of your financial plan for college. You could save thousands or even get your whole education paid for.
3. Make your student loan payments more manageable
Sometimes, loan payments can feel overwhelming. So if you find yourself in that situation, know that you do have options.
For example, one option for debt relief is to refinance your student loans. Refinancing allows you to take out a new student loan to replace your existing one. It could help in several ways.
Lower your interest rate
For instance, you can refinance your loans to lower your interest rate. It could also be that you have a lot of loans you're looking to combine into one to make the payment process easier.
Or you may be looking to pay off your loans faster based on the new lower interest rates. These may be good reasons to refinance.
It is however important to note that refinancing is not for everyone, and doesn't always solve student debt crisis problems.
There will be instances where the new loan doesn't come with many benefits and could end up wasting your time. So before you make a decision, do your research. You can start with our guide to refinancing your student loans.
Income-based repayment plans
You might also consider an income-based repayment plan. These allow you to pay off your loans according to your income. However, income-driven repayment plans can take longer to pay off, so consider if it makes sense for your situation.
4. Negotiate your salary and raises, increase your income
Side hustles are all the rage nowadays but do you know there is a quicker and potentially easier way to earn more money? Asking for a raise. It requires a few conversations at most and it doesn't require you to do any additional work.
As women, we tend to shy away from asking for a raise hoping that our hard work will be recognized and rewarded. So we end up leaving money on the table.
It may be daunting to ask for a raise but doing so could really boost your savings, discretionary income, and overall lifestyle.
Start a business
If you have an entrepreneurial streak, starting a side hustle could be a great way to increase your income and you can also explore passive income streams. Find the type of business that's right for you and be sure to pick something according to how much time you can spend on it.
5. Create a budget with a focus to pay down debt
Budgets are a surefire way to tackle student debt. Without a budget, you'll be shooting blindly. A budget ensures that your student loans are a priority that you address every single month.
Debt often requires a radical commitment to getting free from it as quickly as possible. Whether it's credit card debt or student loans, it involves short-term sacrifice for long-term freedom and peace of mind.
If you're getting started with budgeting, it's important that you find a budgeting method that works best for you. And as you budget, consider how scholarship money can make budgeting easier and allow you to pay off your education quicker, freeing you from the student debt crisis.
To start making a budget, be sure to know what your household income is, how much you owe for student loans, any other loans like auto loans, and the cost of your monthly expenses such as a mortgage and groceries.
Then you can make a realistic debt payoff plan and avoid the student loan debt crisis.
Other places to find money for college
There are also other options to help you pay for college.
Consider applying for Federal Pell Grants if you're working towards your bachelor's degree. You could also look into a public service loan forgiveness program if you qualify.
Another idea is to pay for school slowly while working or to go to a community college for your first few years, and then transfer to a 4-year college, as this is generally a cheaper option.
These are just a few suggestions, but being willing to think differently can help you to pay for school with as little financial burden as possible.
Leverage these tips as a black woman to overcome the student debt crisis
As black women continue to face the severe impact of the student loan crisis more so than other demographics, it's important that this issue continues to get highlighted. This is necessary to drive change.
If you are a black woman overwhelmed by your student loans, please know that despite the challenges, you can still get ahead. Be kind to yourself and lead with a plan.
A part of our mission here at Clever Girl Finance is to empower our community with the knowledge they need to understand how student debt really works. We will continue to empower women to tackle and get ahead on their debt in order to achieve financial wellness and in turn, gain financial power.