Student Loan Debt and Forgiveness: How It Impacts Latino Students

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Latino students take out more student loans to pay for their education than their White peers, adding to a racial/ethnic wage gap and harming upward mobility.

In fact, even 12 years after graduation, Latino students still maintained over 83% of their loan debt, compared to only 65% for White borrowers, according to a recent report from the nonprofit Student Borrower Protection Center.

“Borrowers in majority-Black and majority-Latinx neighborhoods shoulder greater debt burdens and struggle disproportionately when repaying their loans,” according to the Borrower report. “The more racially segregated a neighborhood grows, the larger the student loan disparities become, with borrowers in the most segregated areas being up to five times more likely to fall behind on their loans than those in the whitest areas.”

“Together, these findings offer stark new evidence of the role of the student debt in exacerbating the nation’s vicious cycle of inequality and persistent racial wealth gap.”

Let’s explore Latino student debt, and how student loan forgiveness could help.

Student Loan Debt Impacts on Latino Students

Roughly 72% of Latinos students take on debt to attend college, according to the recent report from the nonprofit Student Borrower Protection Center.

That’s more than the 66% of white students who take out loans.

“Research has shown that the fallout of the student debt crisis is disproportionately borne by individual student loan borrowers of color, especially Black and Latinx borrowers,” the study states. “Building on top of these findings, an emerging body of research conducted by cities has exposed the role this debt plays in exacerbating racial and economic disparities between majority-white and non-white communities, particularly as rates of segregation climb.”

This kind of money lending has wide-sweeping impacts on the Latino community.

As student loan borrowers struggle to repay their loans, they forego retirement savings, and wealth accumulation, according to the report.

“Research shows that borrowers with higher student burdens pay more for other consumer financial products, further hampering wealth accumulation and driving income inequality,” the report states. “The impact of student debt also extends to entrepreneurship and family formation as borrowers put off starting businesses and families.”

When it comes to timely loan repayment, currently:

• A borrower in a majority-minority neighborhood is 2.6 times more likely to fall behind
• A borrower in a 75 percent-minority neighborhood is 4.2 times more likely to fall behind
• A borrower in a 90 percent-minority neighborhood is 5.0 times more likely to fall behind

“Where higher education once stood as a promised gateway to the middle class, the reality is much bleaker,” the report states. “The disparities in the student loan market rival outcomes borne of the most predatory redlining tactics perpetrated by unscrupulous lenders. This cost is uniquely borne by borrowers of color, particularly Black and Latinx borrowers — all incurred simply because they chose to pursue the American Dream.

“For millions of borrowers of color, higher education does not unlock the door of economic mobility as a means to overcome systemic inequalities. All too often, it does exactly the opposite.”

This is not a new issue, either.

Another study from Ohio State University found that student loan debit crippled Latinos during the great recession from 2007 to 2009.

“People who were already financially stressed going into the recession were much worse off to begin with,” said Elizabeth Martin, a doctoral student in sociology at The Ohio State University and lead author of the study. “But when we looked at other measures­ – specifically at the amount owed – we found that Black and Latinx households were starting to face higher levels of financial stress at lower levels of debt load than white households.”

How Student Loan Forgiveness Could Help Latino Students

By definition, student loan forgiveness releases borrowers from their obligation to repay part or all of their federal student loan debt. This kind of forgiveness can currently be accessed by certain public service, educational, or military professions.

Still, legislators in Washington and education advocates have been calling for a country-wide relief of all student loans.

As the COVID-19 pandemic swept across the U.S. and caused countless economic burdens, the federal government ordered student loan companies to halt payments and not charge interest on the pause. President Joe Biden recently extended the pause on student loan repayments until May 2022.

“Pressure is mounting from all fronts. It’s mounting from grassroots, it’s mounting from the public, and it’s mounting from members of Congress. And the reality of the economy, the midterms, there are several pressures that are aligning. They really have to deliver,” said Thomas Gokey, an organizer with the Debt Collective.

Historically, student loan forgiveness has been rare, but movement is being made.

“Biden has canceled billions in student loan debt, including for those with permanent disabilities or those defrauded by for-profit colleges,” NPR reports.

This conversation is ongoing as many advocates are calling on Biden to officially cancel student loans for good.

Ending student debt, according to the research, can help Latinos in a few ways, according to the recent report from the nonprofit Student Borrower Protection Center.

The cancellation of student loan debt would skyrocket the wealth in communities of color.

Student loan debt relief would free up people of color’s expenses which, experts say, and raise people of color’s spending power, thus boosting the economy.

Moreover, debt relief would go to help the mental health of those communities, given that financial burdens can be a major contributing factor of poor mental health.

“For too long, the perpetuation of these unconscionable racial disparities has persisted under the ill-conceived and dangerously naive notion that student debt is ‘good debt,’” the report states. “It is time to break this cycle for the millions of borrowers disproportionately struggling with this debt now, and also for those poised to see their communities buried under it if the status quo remains.

“America’s student debt crisis is a civil rights crisis.”

What You Can Do to Improve Latino Education

Latino and all students deserve to begin their careers and adult lives with as little debt as possible, researchers say.

To do his, critical action is necessary from policymakers on student loan forgiveness.

But there are also ways current and former students can take action to pay off student debt.

CNBC’s College Voices provides 6 actions to navigate student loan debt:

1. Talk to your family and your school. Sansone suggests having these conversations with your family and asking your school’s financial aid office as many questions as you need, so you can make an informed decision.
2. Don’t wait until after graduation to start paying. Yanely Espinal, director of educational outreach at Next Gen Personal Finance, suggests that you start making monthly payments — even if it’s just $10 or $15 a month — to start getting rid of the accrued interest in your student loan account.
3. Start investing and saving money at an early age. “Opening a 529 savings plan or even just a brokerage account where every single month or every few ones you’re consistently adding money to that account and allowing it to grow, it has a very high chance of growing over 10, 15 or 20 years,” Espinal said.
4. Evaluate the terms of your loan. If your monthly minimum payment required is very high, change your student loan plan and go with the longest term available.
5. Pay extra on your loans. After covering your necessities, put extra money toward your loan payment.
6. Set up automatic payments by linking your checking account to your federal student loan portal — that can help save you money on interest.

Access to quality education remains an issue for Latinos.

Whether it is living in child care deserts, language issues and immigrant status, unengaged parents, childhood trauma, discipline, segregated school districts, and a lack of state funding—many Latinos are left behind in education compared to their white peers.

Systemic racism and discrimination make it harder for Latino and Black people to get quality access to education, healthcare, housing, transportation, employment, healthy food, safe treatment by police, all of which are worsened by the COVID-19 pandemic.

You can download and use the Salud America! “Get Your City to Declare Racism a Public Health Crisis Action Pack” to fight racism in your community.

The Action Pack will help you gain feedback from local social justice groups and advocates of color so that you can start a conversation with city leaders for a resolution to declare racism a public health issue along with a commitment to take action to change policies and practices.

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