The College Debt Trap: Black Graduates Owe 50% More and Earn 25% Less

The American promise of education as the great equalizer has a corollary that no commencement speaker mentions and no financial aid brochure discloses: for Black Americans, the degree that was supposed to close the wealth gap is, in a bitter and mathematically precise irony, widening it. The data is not ambiguous, and it is not contested by anyone who has examined it honestly. Black college graduates leave school with an average of $25,000 more in student loan debt than their white counterparts. Four years after graduation, that gap has not narrowed. It has exploded to approximately $53,000, because Black graduates are more likely to pursue graduate education (taking on additional debt), more likely to enter lower-paying fields, and more likely to earn less than white graduates in the same fields due to persistent wage discrimination. The degree did not equalize. The degree, loaded with debt and paired with lower returns, became a trap.

Judith Scott-Clayton, the Columbia University economist whose research on student loan default has reshaped the national conversation about higher education financing, documented what she called a “looming crisis” that is, for Black borrowers, not looming at all but already fully arrived. Her analysis of federal data found that approximately 49% of Black borrowers who entered college in 2003-04 had defaulted on their student loans within twelve years — nearly five times the default rate for white borrowers. Even among bachelor’s degree holders — the group that the “college is worth it” narrative is built around — Black graduates default at higher rates than white students who dropped out without completing a degree. That statistic is worth pausing on: a Black person with a bachelor’s degree is more likely to default on student loans than a white person who never finished college.

This is what it looks like when the promise breaks. Not for the people who never believed it, but for the people who followed every instruction, checked every box, did everything they were told to do, and discovered that the arithmetic of higher education in America operates by different rules depending on the color of your skin.

The Compounding Problem

To understand why Black student debt is larger and more destructive than white student debt, you must understand a cascade of interconnected disadvantages that begins before the first tuition payment and continues long after the last.

Black families have, on average, one-eighth the wealth of white families. The Federal Reserve’s Survey of Consumer Finances documents a median Black household net worth of approximately $24,100 compared to $189,100 for white households. This wealth gap translates directly into an education financing gap: white families are dramatically more likely to pay for college from savings, home equity, or family gifts. Black families are dramatically more likely to finance college entirely through borrowing.

The Parent PLUS loan program, designed to help families bridge the gap between financial aid and the cost of attendance, has become a particular burden for Black families. Black parents borrow an average of approximately $30,000 through the PLUS program — nearly double the average for white parents. These loans carry higher interest rates than subsidized student loans, offer fewer repayment protections, and are taken on by parents who often have limited retirement savings and no other assets against which to borrow. A Black mother who takes out a PLUS loan to send her child to college is frequently mortgaging her own financial security for a return on investment that the data says will be substantially smaller than the return a white family receives on the same investment.

Fenaba Addo, in her research on racial disparities in student loan debt, documented a finding that should have ended the “college pays for itself” narrative for Black borrowers permanently: the wealth gap between Black and white young adults actually widens among those with college degrees compared to those without. A Black young adult with a bachelor’s degree has, on average, lower net worth than a white young adult with only a high school diploma, because the Black graduate is carrying debt that the white graduate’s family absorbed, while entering a labor market that pays the Black graduate less for the same credential.

The For-Profit Predators

If the student debt crisis for Black borrowers at traditional institutions is a slow-motion catastrophe, the for-profit college industry represents something closer to organized financial predation. The numbers are so extreme that they read less like educational statistics and more like the discovery documents from a fraud prosecution — which, in several cases, they literally are.

Black students are dramatically overrepresented at for-profit colleges. While Black Americans constitute approximately 13% of the general population and roughly 14% of traditional college enrollments, they represent approximately 28% of students at for-profit institutions — a 150% overrepresentation. This is not accidental. Internal documents from for-profit chains that have been made public through litigation and congressional investigations reveal targeted marketing strategies aimed at low-income Black communities, with recruitment materials emphasizing the prestige of a college degree while minimizing or concealing the cost, the debt burden, and the dismal completion and employment rates.

The outcomes for Black students at for-profit institutions are catastrophic by any measure. Completion rates at for-profit bachelor’s degree programs average approximately 23% — less than half the rate at public institutions. Students at for-profit schools take on approximately three times the debt of students at comparable public institutions. And the value of the degree in the labor market, for those who complete it, is often negligible: employer surveys consistently show that for-profit credentials are viewed with skepticism or outright dismissal by hiring managers.

The result is a population of predominantly Black borrowers who carry enormous debt burdens for credentials that did not lead to employment, at institutions that spent more on marketing than on instruction, and who now face default and the cascading financial consequences — wage garnishment, credit destruction, tax refund seizure — that attend it. The for-profit college industry did not merely fail Black students. It identified them as a revenue source, extracted maximum federal financial aid from them, provided minimal education in return, and left them worse off financially than if they had never enrolled.

The HBCU Question

Historically Black Colleges and Universities occupy a complex position in the student debt conversation. On one hand, HBCUs produce a disproportionate share of Black graduates in STEM fields, send a disproportionate share of Black students to graduate and professional school, and provide a campus culture that research consistently links to higher levels of academic engagement and racial identity development. On the other hand, HBCU students take on significant debt — often more than their peers at public flagship institutions — and the endowments of most HBCUs are so small that they cannot provide the need-based financial aid that would reduce borrowing.

The median HBCU endowment is approximately $37 million. The University of Virginia’s endowment exceeds $14 billion. This disparity — itself a legacy of centuries of unequal public investment in institutions serving Black students — means that HBCUs cannot compete on financial aid. A Black student admitted to both Howard University and the University of Virginia may receive a significantly larger financial aid package from UVA, creating a perverse incentive structure in which the institution purpose-built to serve Black students is financially less accessible than the institution that excluded Black students within living memory.

The debt levels at HBCUs must be understood in this context. They are not a reflection of institutional irresponsibility but of structural underinvestment that stretches back to the Morrill Act of 1890, which created the legal framework for public HBCUs while consistently underfunding them relative to their white counterparts. When states allocated land-grant funds, white institutions received approximately ten times the funding of Black institutions. That funding disparity, compounded over 130 years, is the reason that HBCU students borrow more and that HBCU endowments remain a fraction of their PWI counterparts.

“We cannot celebrate HBCUs for producing a disproportionate share of Black professionals while allowing the funding structures that force their students into disproportionate debt. The contradiction is not sustainable, and it is not accidental.”
— Walter Kimbrough, former president, Dillard University

The Alternatives That Work

The college debt trap is not inevitable. There are pathways to economic advancement that do not require mortgaging a young person’s financial future before it has begun, and the Black community needs to discuss them with the same urgency and enthusiasm currently reserved for four-year degrees at any cost.

Community college transfer pathways. A student who completes two years at a community college and transfers to a four-year institution saves, on average, approximately $30,000 in tuition and fees compared to a student who attends all four years at the four-year institution. Transfer agreements between community colleges and public universities are now common in most states, and the quality of instruction at strong community college programs is comparable to the lower-division courses at four-year schools. The stigma attached to community college in Black communities — the perception that it is somehow less than — is a cultural attitude that is costing families tens of thousands of dollars in unnecessary debt.

Earn-and-learn models. Apprenticeship programs in the skilled trades, technology, and healthcare offer a fundamentally different proposition than the traditional college model: they pay the student to learn rather than charging the student to learn. A registered apprentice in electrical work, plumbing, HVAC, or information technology earns a wage from day one while receiving structured training that leads to a credential with demonstrated labor market value. Upon completion, the apprentice has zero debt and a median income that often exceeds that of a bachelor’s degree holder in a non-STEM field.

Employer tuition programs. Companies including Amazon, Walmart, Starbucks, and UPS now offer tuition reimbursement or direct tuition payment for employees pursuing degrees. These programs allow workers to earn a degree without debt by combining employment with education. The programs are underutilized — participation rates average below 5% of eligible employees — and the underutilization is highest among the Black employees who would benefit most. Black community organizations, churches, and professional networks should be actively connecting young people with these programs and supporting them through completion.

The Conversation We Must Have

The hardest conversation that the Black community needs to have about higher education is this: college is not always worth it. This is heresy in a culture that has, with good reason, invested enormous emotional weight in educational achievement as the pathway out of poverty and discrimination. But the data is forcing a reckoning with a more complicated truth. College is worth it when it leads to a degree with labor market value, when the debt taken on is proportional to the expected return, and when the institution providing the education is investing its resources in instruction rather than in marketing. College is not worth it when it leads to six figures of debt for a degree in a field with limited employment prospects, when the institution is a for-profit enterprise that views the student as a revenue source, or when the borrower’s family is leveraging its entire financial future on a proposition that the data says will not pay off.

This does not mean Black people should not go to college. It means Black families need better information, better counseling, and better alternatives. It means high school guidance counselors in Black schools need to discuss return on investment alongside admissions criteria. It means parents need to understand the difference between subsidized and unsubsidized loans, between institutional grants and federal borrowing, between programs that lead to employment and programs that lead to more school. It means the Black community needs to celebrate the electrician who completed an apprenticeship debt-free with the same pride it celebrates the lawyer who graduated $200,000 in the red, because the electrician is building wealth and the lawyer may be drowning in it.

The promise of education as the great equalizer is not wrong in principle. It is wrong in the specific form it has taken in modern America, where the cost of education has outpaced wage growth by a factor of eight, where student debt has surpassed $1.7 trillion nationally, and where the burden of that debt falls most heavily on the people who were told most emphatically that the degree would set them free. For Black Americans, the debt data tells a story that the commencement speakers will not: education without economic strategy is not liberation. It is another form of extraction, dressed in a cap and gown, with interest accruing from the moment the first payment is missed.

The alternatives exist. Community colleges, apprenticeships, employer-funded programs, strategic borrowing at institutions with demonstrated outcomes — these pathways to economic advancement do not require a generation of young Black adults to begin their professional lives carrying more debt than their parents’ homes are worth. What is required is a willingness to question the narrative, do the math, and choose the pathway that builds wealth rather than destroys it. The children being counseled into college this spring deserve adults who love them enough to look at the debt data and tell them the truth: the degree is only worth what it costs, and right now, for too many Black families, it is costing everything.