Liberty Street Economics, the blog of the Federal Reserve Bank of New York, recently published “Racial Disparities in Student Loan Outcomes.” By grouping individual borrowers based on income and zip code, and then categorizing each zip code by the majority racial demographic of its inhabitants, the researchers were able to produce a rough approximation on student loan outcomes by race.
Among the findings:
- 23% of individuals in black majority zip codes borrowed student loans, compared to 17% of individuals in Hispanic majority zip codes, and 14% in white majority zip codes.
- Income disparities can explain some of this. Lower-income individuals generally borrow more students loans to pay for postsecondary education, even after need-based aid is taken into account.
- Student loan balances differed across black majority, Hispanic majority, and white majority zip codes.
- Black majority zip codes had the highest student loan balances ($37,000). Hispanic majority zip codes had the lowest student loan balances ($29,000).
- Until 2010, loan balances of black majority and white majority zip codes were very similar. Since 2010, loan balances in black majority zip codes have increased more quickly than in white majority zip codes.
- Default rates vary across zip codes.
- Black majority zip codes have a default rate of 17.7% and Hispanic majority zip codes have a default rate of 13%. White majority zip codes have a default rate of 9%.
