Wealth is important. A person’s wealth—measured by summing their total assets, such as a home, retirement savings, and emergency savings or rainy day funds, and subtracting debts such as student loans and medical debt—is a major indicator of that person’s economic security, helps them and their family weather economic downturns, and supports their overall well-being.
But wealth is not distributed equally; in fact, there are staggering gaps in wealth when measured by gender and race. For every $1 that white men have in net wealth, Black women have a mere 5 cents, Hispanic women have 10 cents, and white women have 56 cents. (See Figure 1.) These wealth gaps are rooted in the intersectional and compounding forces that hamper economic growth and well-being for women and people of color. And so, closing the wealth gap requires paying particular attention to the mechanisms that make wealth-building more difficult for women, particularly Black and Latine women.
Figure 1
One of the critical ways for women—women of color in particular—to achieve higher earnings and thus build wealth is to pursue higher education. However, the path to obtaining a degree or credential itself also includes a number of obstacles that can hamper women’s progress toward building wealth—particularly for Black and Latine women. The gender pay gap, increased likelihood of student loan borrowing, lengthier periods of debt repayment, the lack of child care supports for student parents, and disproportionate enrollment in for-profit colleges all pose challenges to women’s ability to reap the full economic benefits of higher education and thus build wealth more rapidly; and, many of these obstacles are larger for women of color. Thus, debt relief is one important solution for narrowing the gender and race wealth gaps.
The Promise—and Peril—of Higher Education
Successful completion of a degree or credential is correlated with higher wealth, on average, for women of all races and ethnicities, as Figure 2 demonstrates. Latine women with a bachelor’s degree, for example, have three times more wealth than those who only have a high school diploma. Black women with a bachelor’s degree have seven times higher net worth than Black women with a high school diploma. And yet across nearly every level of educational attainment, white women enjoy a wealth premium: white women with a bachelor’s degree, for example, have more than twice the net worth of Black or Latine women with a bachelor’s degree.
Figure 2
Higher education continues to provide a wage premium. On average, women with a bachelor’s degree earn $548 more per week than women who only hold a high school diploma. However, higher education is also costlier for women, and especially Black women, who disproportionately rely on student loans to finance higher education. Not only do more Black women have student loan debt (53 percent) compared to other groups, but the average amount of student loan debt that Black women hold is higher than other groups.
In addition to having higher debt levels, Black students have lower graduation rates than postsecondary students of other races. Noncompleters with debt have a much lower return on investment than graduates with debt. For example, women with some college or an associate degree only earn $125 more per week than women with a high school diploma. Latine students have slightly higher completion rates than Black, Pacific Islander and Native students. Latine households also have slightly lower shares and levels of student debt than Black households. Yet, these differences aren’t translating to a higher net worth for Latine students compared to others.
Student Debt Is a Women’s Wealth Issue
Closing the wealth gap for Black and Latine women will require policies that increase their assets and reduce their debts. To achieve these goals, policies must ensure that postsecondary education provides a high return on investment and leads to higher wages for women and people of color. While higher education alone cannot solve for gender and racial gaps in wages and wealth, it is an important part of helping Black and Latine women earn higher wages, and generate wealth. Thus, prioritizing education quality and completion of credentials is crucial for education to be an investment that leads to greater asset-building than would have otherwise occurred. Additionally, changes must be made to the way higher education is financed in order to reduce students’ debt burden, so that education is accessible and a vehicle for wealth-building. Both of these goals have major implications for policy making.
Women first gained access to higher education as we know it today in the early to mid-nineteenth century, nearly 200 years after men began being admitted to American colleges. The rise in women’s colleges, anti-discrimination legislation, and the movement toward professionalization over the past century encouraged more women to pursue postsecondary education, with the result that today, women are outpacing men in college enrollment and completion by significant margins. Since 2000, women have made up the largest share of adults ages 25–34 with bachelor’s degrees. Despite this rise in degree attainment, women have not reaped the same economic returns to college education or advanced degrees that men typically receive.
The unequal burden of student debt penalizes women for their pursuit of higher education, but not all women share this burden equally.
While higher education continues to provide a meaningful return on investment, and women have greater access to higher education today, economic conditions still create barriers for their entry, completion, and long-term success post degree attainment. Skyrocketing costs including non-tuition expenses and fees have prompted all students regardless of gender to borrow considerably more than previous generations. Given their overrepresentation in the nation’s colleges and universities, it’s no surprise that women hold nearly two-thirds of the federal student loan debt. A larger percentage of women (41 percent) take on student debt compared to men (35 percent). And unfortunately, because women are paid less than their male counterparts, they face unique challenges in repayment, which often lengthens the time it takes them to pay off their education debt—by two years, on average. The unequal burden of student debt penalizes women for their pursuit of higher education, but not all women share this burden equally.
Even as overall college enrollment trends downward and debates about the value of a college education rage on, women have not abandoned higher education at the same rates as men. The gender wage gap is likely a driving force behind women’s decision to pursue higher education. College completers report higher earnings and lower rates of unemployment, as well as increased likelihood for access to employer-sponsored benefits including health insurance, retirement plans, and student loan assistance. Those without a postsecondary credential or degree face a much narrower path to employment that provides entry into the middle class. Estimates show that by 2031, nearly three-quarters of U.S. jobs will require some postsecondary education or training. Women seeking access to high-wage fields and those looking to upskill in the hope of finding recession-proof employment are right to view higher education as a vehicle for upward mobility.
Just as women have become a main fixture on college campuses, our campuses have also grown more racially and ethnically diverse. Women of color have substantially increased their college going and degree attainment rates over the past thirty years. Unfortunately, that period has also seen college costs rise exponentially. There is no single factor driving the rising cost of college; inadequate state investment in higher education as well as rising administrative costs such as for faculty and staff and other non-tuition expenses are all partly to blame. Some states and individual colleges have begun to introduce tuition freezes, expand access to scholarships, and offer free and reduced tuition to low-income students to address these challenges, but students and their families continue to borrow more and more to finance their higher education.
Students without access to wealth may be more likely to debt-finance their education; furthermore, the inability to rely on independent or familial wealth also creates economic instability that impedes the ability to repay.
The cost of college is not only a barrier to admission and persistence, but rising costs and their direct effect on the need to debt-finance education creates long-term challenges to wealth accumulation for women, particularly women of color. Research indicates that the racial wealth gap persists across all income and educational attainment levels, underscoring the disproportionate burden women of color face in wealth accumulation and debt repayment. Racial inequalities in parental wealth, ability to save for children’s college, and types and sectors of institutions attended, as well as racial discrimination in the labor market post-graduation all contribute to racial disparities in student debt burden. Here it’s important to note that wealth and poverty are interrelated and women students of color face barriers not only related to the racial wealth gap but their increased incidence of poverty. Students without access to wealth may be more likely to debt-finance their education; furthermore, the inability to rely on independent or familial wealth also creates economic instability that impedes the ability to repay. Black women carry debt averages higher than those of any other demographic group. And Black borrowers are more likely to have loan balances far beyond their original loan amount, even several years out from graduating with a bachelor’s degree. While Latine students borrow at similar rates as their white peers, lower household incomes and levels of wealth compound the weight of their student loan debt.
Just as outcomes differ for students of varying race and ethnicity, gender, and socioeconomic backgrounds, they also differ for students in different institutional sectors. Public, private nonprofit, and for-profit colleges differ in how they are funded and, in some instances, the local and federal regulations that are applied to them. While institutional control is not the only factor that determines whether a student will face large debt burdens or challenges in repayment, for-profit college students, who are more likely to be students of color, are driving the increasingly high rates of student loan debt and defaults. Compared to public, two-year college students, for-profit students are more likely to pay for college using student loans.
Higher Education Is Costly for Student Parents
Nearly one-in-five undergraduate students have dependent children. Nearly three-quarters of parenting students (74 percent) are women. Student parents are more likely to be low-income students, first-generation students and older students than non-student parents. The vast majority of mothers enrolled in college are single parents. Student parents may face additional challenges including the need to work, often full-time while enrolled in a postsecondary degree or certificate program and the need to ensure younger children have access to safe child care. Because women tend to be concentrated in low-wage jobs, earning enough to afford college tuition and fees and maintain a household can be particularly challenging.
The largest share of student parents attend public, two-year colleges, which often offer flexible class schedules and lower prices than private institutions. Despite the numerous benefits a community college education may afford student parents, access to child care remains limited at community colleges, making it challenging for parenting students to attend classes if they do not have access to other child care options. Four-year institutions are more likely to have on-campus care than community colleges. Additionally, most institutions of higher education do not offer child care for student parents but rather for faculty and staff.
Child care is very expensive in the United States, and in thirty-nine states and the District of Columbia, the average cost of child care is more expensive than in-state tuition. So parents with young children face higher costs for their education. This may explain why single mothers in particular are more likely to withdraw before completing their degree which leaves them with higher debt loads but lower economic returns.
Predatory Institutions Compound the Problems
Enrollment in for-profit higher education institutions continues to grow as new and returning students seek educational opportunities that fit into their lives, fueled in part by marketing campaigns that imply that for-profit colleges will “fast track” both the admissions process and the program of study. Students and their families make huge investments in higher education no matter what type of institution, but those who attend for-profit institutions often find little in the way of economic rewards. In addition, billions of dollars in federal government funds goes to for-profits every year; of all the students attending four-year for-profit institutions in 2020–21, 62.2 percent were federal grant recipients, no doubt a testament to the fact that these institutions enroll a disproportionate number of low-income students. Significant portions of the federal funds these colleges receive are used for the companies’ advertising and marketing efforts rather than instruction.
This sub-par return on investment at for-profit institutions hits women harder than men because undergraduate and graduate enrollment at for-profit institutions is disproportionately female and low-income. For-profit college students are also more likely to be older students, including those who previously attended college and then discontinued their studies and also student parents. These students are less likely to complete but more likely to borrow student loans. Not only are socioeconomically disadvantaged students more likely to enroll in the for-profit sector, the institutions themselves contribute to and exacerbate these disadvantages due to the much lower return on investment of a degree or credential from a for-profit institution, compared to public and private nonprofit institutions. Given the disparate outcomes of for-profit college students, why are the most vulnerable and marginalized students enrolling at these institutions? The same gender, wealth and income inequality that pushes students to pursue higher education makes them susceptible to targeted marketing and recruitment materials. For-profit schools are known to routinely engage in targeted recruitment and enrollment of students of color.
Nearly one in five student parents attend private, for-profit institutions.
Targeting advertising of high-cost, low-value postsecondary programs to low-income students and students of color is sometimes referred to as “predatory inclusion.” By locating themselves in wealth-deprived communities, which often lack other postsecondary educational programs, for-profit colleges minimize the geographic barriers to college. While the students they serve may see this nearness as a tremendous benefit, the relationship between student and institution may not be totally symbiotic. Students in low-wealth, low-income communities—including racialized minorities and those with dependents—may qualify for a considerable amount of financial aid, from which the for-profit institution can generate revenue. Students take on high amounts of debt for degrees that frequently, in the end, have little payoff for them but large financial compensation for the education provider. And who are the students most likely to be victimized by predatory for-profit institutions? Nearly one in five student parents attend private, for-profit institutions. Likewise, nearly one in five of post-9/11 GI Bill beneficiaries are enrolled in for-profit institutions. It’s worth noting that compared to Latine students attending nonprofit institutions, those enrolled at for-profit institutions experience worse outcomes.
The overrepresentation of women of color in the for-profit sector is especially concerning given their disparate short- and long-term higher education outcomes and may be a contributing factor to the difficulty they have in reducing their student debt. Black women in particular report the lowest loan payoff rate for education debt and report the highest levels of stress surrounding student loan repayment. The typical Black student loan borrower reports a negative net worth into their 30s even as the typical white borrower has broken even by then. Black borrowers see almost no reduction in their student loan balances even decades after entering repayment.
Recently, women have become the majority of graduate degree recipients. In the academic year 2021–22, women received 62.6 percent of master’s degrees and 57 percent of doctoral degrees. And likewise, women of color tend to be overrepresented among advanced degree recipients from for-profit colleges—meaning they disparately feel the ill effects of sub-par for-profit programs. In October 2024, a federal court in Maryland approved a class action settlement in a lawsuit filed by former Walden University students accusing the institution of targeting women and Black students for its doctorate of business administration (DBA) program then overcharging them by arbitrarily requiring students complete additional credits at a substantial financial and personal cost. Victims of predatory institutions are often left with tremendous debt burdens that cannot repay. If they default on their loans, it hurts their credit, and they can face years of garnished wages, seized tax refunds, not to mention difficulty borrowing to pay for a car or house, and can face further obstacles if they try to attend another institution to finish their education. Thankfully, in addition to settlements like the one described above, there is debt relief available to borrowers who were defrauded by their institution or attended colleges that closed before they completed their course of study.
Debt Relief Is Critical for Closing the Wealth Gap
Most graduates with federal student loans begin repaying their education debt at the same time they commence their working careers. Because women are paid less than men, they experience a lower economic boost from their degrees and face unique challenges in repayment. In general, women are in student loan repayment longer than men due at least in part to the fact that women with lower earnings make smaller monthly payments than men with higher earnings.
Borrowers need more flexibility and relief during repayment, especially those facing dire economic consequences.
Strengthening borrower protections in the federal student loan program and for those with private loans is critical for supporting borrowers, particularly borrowers of color, during this difficult time as they transition from learners to earners. Borrowers need more flexibility and relief during repayment, especially those facing dire economic consequences. During the late 1990s and 2000s, the federal government introduced a number of debt forgiveness programs, but these pathways to debt relief are limited and inefficient.
In addition to the relief available to students who were defrauded or misled by their institutions, borrowers have several avenues to reduce their monthly payments and eliminate portions of their debt balances. There are currently four income-driven repayment (IDR) plans administered by the U.S. Department of Education that are available to borrowers with federal student loans. As of June 2024, more than 13 million borrowers were enrolled in a repayment plan. Generally, the payment amount under an IDR plan is based on a varying percentage of the borrower’s discretionary income. Most IDR plans require borrowers to make consistent monthly payments that amount to 10–20 percent of their discretionary income for a period of twenty to twenty-five years. Saving on a Valuable Education (SAVE), the most recently introduced IDR plan, which protects the most income by basing monthly payment on a smaller portion of the borrower’s adjusted gross income (AGI), is no longer taking new applicants following a federal court issued injunction. SAVE, which replaced the Revised Pay as You Earn (REPAYE) program in 2023, was an important lifeline for low-income borrowers. One of the plan’s most generous benefits is that borrowers do not see their balances grow while in repayment because the Department of Education pays any interest not covered by the borrower’s monthly payment.
Unfortunately, several states have mounted legal challenges that would block federal student loan borrowers’ access to SAVE; these lawsuits also pose a threat to other IDR and loan forgiveness programs. As of July 1, 2024, the Department of Education stopped enrolling borrowers into two of the IDR plans, Income Contingent Repayment (ICR) and Pay As You Earn (PAYE), (although the department may open these plans back up for enrollments in response to developments in the litigation). The legal challenge has made it difficult for borrowers to enroll in or change IDR plans. The department is still enrolling borrowers in Income Based Repayment (IBR), the only plan where eventual forgiveness is protected by law, but that plan requires significantly higher payments than SAVE. Additionally, under IBR, borrowers may continue to experience negative amortization; that is, the amount owed may go up even as a borrower is making payments. Because women face the dual challenges of high debt burdens and employment discrimination, they may be more likely to rely on the protections afforded by IDR and the Public Service Loan Forgiveness (PSLF) program (see below), meaning they are disproportionately hurt by losing access to the best IDR options. Additionally, under IBR, borrowers may continue to experience negative amortization; that is, the amount owed may go up even as a borrower is making payments. Because women face the dual challenges of high debt burdens and employment discrimination, they may be more likely to rely on the protections afforded by IDR and PSLF. Black borrowers with a bachelor’s degree are more likely to be enrolled in IDR than other racial groups. IDR plans play an important role in helping low-income and low-wealth borrowers manage their debt by lowering their payments and keeping them out of default, but borrowers’ interest and balance can continue to balloon even if the remaining balance is eventually forgiven.
In 2007, Congress passed a law creating the PSLF program, promising debt forgiveness to student loan borrowers who made regular student loan payments and did public service work for a period of ten years. PSLF requires the borrower to make at least 120 on-time monthly payments before they’re eligible for relief. Not only do women make up the largest share of graduate degree recipients, but they also are overrepresented among workers with graduate degrees in education and public service. Unfortunately, making full monthly payments with a low-wage job and meeting other requirements of the PSLF program can be difficult.
In late 2022, the Department of Education announced several permanent changes to the PSLF program that will provide more flexibility around “qualifying payments” shortening the pathway to debt relief for many borrowers. However, there are still a number of borrowers, particularly women borrowers, who are artificially locked out of relief. Despite the Congressional intent, the department’s PSLF implementation has prevented many borrowers from reaping the benefits of the program. Countless borrowers have been misled by loan servicers who didn’t fully understand and follow the law, while other borrowers were steered to less advantageous options, such as entering economic hardship forbearance, and others were denied because of the department’s regulations interpreting the law. At present, whether a borrower qualifies for forgiveness under PSLF is based on their loan payments and the legal status of their employer, not the job the borrower actually does.
Early educators and child care providers are one group that is predominantly composed of women, provides a critical public service, is paid low wages that make it difficult to repay loans, and yet large swaths of these workers have historically been excluded from PSLF. Recent data show that 76 percent of early childhood educators have either a postsecondary credential or a professional certificate such as a child development associate credential. Furthermore, a new survey from RAPID found that more than one in five child care providers had student loan debt, with the average level of debt ranging from $26,000 for a center-based teacher to $109,000 for family, friend, and neighbor providers. Expanding eligibility for borrowers such as early educators and child care providers would not only meet the statutory intent of the program in the first place, but would also have the added benefit of supporting the economic well being of a sector that is primarily made up of women and women of color.
Looking Ahead
Wealth is essential for the health and well-being of individuals and their families. Breaking families out of cycles of debt is a necessary step toward building an equitable society where all individuals and families have a chance to thrive. Student debt relief in particular is critical for addressing the compounding challenges faced by Black and Latine women and meeting the promise of higher education as a means for reducing the racial and gender wealth.
Tags: student debt, wealth inequality, wealth gap
Student Debt Relief Would Help Close the Women’s Wealth Gap
Wealth is important. A person’s wealth—measured by summing their total assets, such as a home, retirement savings, and emergency savings or rainy day funds, and subtracting debts such as student loans and medical debt—is a major indicator of that person’s economic security, helps them and their family weather economic downturns, and supports their overall well-being.
But wealth is not distributed equally; in fact, there are staggering gaps in wealth when measured by gender and race. For every $1 that white men have in net wealth, Black women have a mere 5 cents, Hispanic1 women have 10 cents, and white women have 56 cents. (See Figure 1.) These wealth gaps are rooted in the intersectional and compounding forces that hamper economic growth and well-being for women and people of color. And so, closing the wealth gap requires paying particular attention to the mechanisms that make wealth-building more difficult for women, particularly Black and Latine women.
Figure 1
One of the critical ways for women—women of color in particular—to achieve higher earnings and thus build wealth is to pursue higher education. However, the path to obtaining a degree or credential itself also includes a number of obstacles that can hamper women’s progress toward building wealth—particularly for Black and Latine women. The gender pay gap, increased likelihood of student loan borrowing, lengthier periods of debt repayment, the lack of child care supports for student parents, and disproportionate enrollment in for-profit colleges all pose challenges to women’s ability to reap the full economic benefits of higher education and thus build wealth more rapidly; and, many of these obstacles are larger for women of color. Thus, debt relief is one important solution for narrowing the gender and race wealth gaps.
The Promise—and Peril—of Higher Education
Successful completion of a degree or credential is correlated with higher wealth, on average, for women of all races and ethnicities, as Figure 2 demonstrates. Latine women with a bachelor’s degree, for example, have three times more wealth than those who only have a high school diploma. Black women with a bachelor’s degree have seven times higher net worth than Black women with a high school diploma. And yet across nearly every level of educational attainment, white women enjoy a wealth premium: white women with a bachelor’s degree, for example, have more than twice the net worth of Black or Latine women with a bachelor’s degree.
Figure 2
Higher education continues to provide a wage premium. On average, women with a bachelor’s degree earn $548 more per week than women who only hold a high school diploma. However, higher education is also costlier for women, and especially Black women, who disproportionately rely on student loans to finance higher education. Not only do more Black women have student loan debt (53 percent) compared to other groups, but the average amount of student loan debt that Black women hold is higher than other groups.
In addition to having higher debt levels, Black students have lower graduation rates than postsecondary students of other races. Noncompleters with debt have a much lower return on investment than graduates with debt. For example, women with some college or an associate degree only earn $125 more per week than women with a high school diploma.2 Latine students have slightly higher completion rates than Black, Pacific Islander and Native students. Latine households also have slightly lower shares and levels of student debt than Black households. Yet, these differences aren’t translating to a higher net worth for Latine students compared to others.
Student Debt Is a Women’s Wealth Issue
Closing the wealth gap for Black and Latine women will require policies that increase their assets and reduce their debts. To achieve these goals, policies must ensure that postsecondary education provides a high return on investment and leads to higher wages for women and people of color. While higher education alone cannot solve for gender and racial gaps in wages and wealth, it is an important part of helping Black and Latine women earn higher wages, and generate wealth. Thus, prioritizing education quality and completion of credentials is crucial for education to be an investment that leads to greater asset-building than would have otherwise occurred. Additionally, changes must be made to the way higher education is financed in order to reduce students’ debt burden, so that education is accessible and a vehicle for wealth-building. Both of these goals have major implications for policy making.
Women first gained access to higher education as we know it today in the early to mid-nineteenth century, nearly 200 years after men began being admitted to American colleges. The rise in women’s colleges, anti-discrimination legislation, and the movement toward professionalization over the past century encouraged more women to pursue postsecondary education, with the result that today, women are outpacing men in college enrollment and completion by significant margins. Since 2000, women have made up the largest share of adults ages 25–34 with bachelor’s degrees. Despite this rise in degree attainment, women have not reaped the same economic returns to college education or advanced degrees that men typically receive.
While higher education continues to provide a meaningful return on investment, and women have greater access to higher education today, economic conditions still create barriers for their entry, completion, and long-term success post degree attainment. Skyrocketing costs including non-tuition expenses and fees have prompted all students regardless of gender to borrow considerably more than previous generations. Given their overrepresentation in the nation’s colleges and universities, it’s no surprise that women hold nearly two-thirds of the federal student loan debt. A larger percentage of women (41 percent) take on student debt compared to men (35 percent). And unfortunately, because women are paid less than their male counterparts, they face unique challenges in repayment, which often lengthens the time it takes them to pay off their education debt—by two years, on average. The unequal burden of student debt penalizes women for their pursuit of higher education, but not all women share this burden equally.
Even as overall college enrollment trends downward and debates about the value of a college education rage on, women have not abandoned higher education at the same rates as men. The gender wage gap is likely a driving force behind women’s decision to pursue higher education. College completers report higher earnings and lower rates of unemployment, as well as increased likelihood for access to employer-sponsored benefits including health insurance, retirement plans, and student loan assistance. Those without a postsecondary credential or degree face a much narrower path to employment that provides entry into the middle class. Estimates show that by 2031, nearly three-quarters of U.S. jobs will require some postsecondary education or training. Women seeking access to high-wage fields and those looking to upskill in the hope of finding recession-proof employment are right to view higher education as a vehicle for upward mobility.
Just as women have become a main fixture on college campuses, our campuses have also grown more racially and ethnically diverse. Women of color have substantially increased their college going and degree attainment rates over the past thirty years. Unfortunately, that period has also seen college costs rise exponentially. There is no single factor driving the rising cost of college; inadequate state investment in higher education as well as rising administrative costs such as for faculty and staff and other non-tuition expenses are all partly to blame. Some states and individual colleges have begun to introduce tuition freezes, expand access to scholarships, and offer free and reduced tuition to low-income students to address these challenges, but students and their families continue to borrow more and more to finance their higher education.
The cost of college is not only a barrier to admission and persistence, but rising costs and their direct effect on the need to debt-finance education creates long-term challenges to wealth accumulation for women, particularly women of color. Research indicates that the racial wealth gap persists across all income and educational attainment levels, underscoring the disproportionate burden women of color face in wealth accumulation and debt repayment. Racial inequalities in parental wealth, ability to save for children’s college, and types and sectors of institutions attended, as well as racial discrimination in the labor market post-graduation all contribute to racial disparities in student debt burden. Here it’s important to note that wealth and poverty are interrelated and women students of color face barriers not only related to the racial wealth gap but their increased incidence of poverty. Students without access to wealth may be more likely to debt-finance their education; furthermore, the inability to rely on independent or familial wealth also creates economic instability that impedes the ability to repay. Black women carry debt averages higher than those of any other demographic group. And Black borrowers are more likely to have loan balances far beyond their original loan amount, even several years out from graduating with a bachelor’s degree. While Latine students borrow at similar rates as their white peers, lower household incomes and levels of wealth compound the weight of their student loan debt.
Just as outcomes differ for students of varying race and ethnicity, gender, and socioeconomic backgrounds, they also differ for students in different institutional sectors. Public, private nonprofit, and for-profit colleges differ in how they are funded and, in some instances, the local and federal regulations that are applied to them. While institutional control is not the only factor that determines whether a student will face large debt burdens or challenges in repayment, for-profit college students, who are more likely to be students of color, are driving the increasingly high rates of student loan debt and defaults. Compared to public, two-year college students, for-profit students are more likely to pay for college using student loans.
Higher Education Is Costly for Student Parents
Nearly one-in-five undergraduate students have dependent children. Nearly three-quarters of parenting students (74 percent) are women. Student parents are more likely to be low-income students, first-generation students and older students than non-student parents. The vast majority of mothers enrolled in college are single parents. Student parents may face additional challenges including the need to work, often full-time while enrolled in a postsecondary degree or certificate program and the need to ensure younger children have access to safe child care. Because women tend to be concentrated in low-wage jobs, earning enough to afford college tuition and fees and maintain a household can be particularly challenging.
The largest share of student parents attend public, two-year colleges, which often offer flexible class schedules and lower prices than private institutions. Despite the numerous benefits a community college education may afford student parents, access to child care remains limited at community colleges, making it challenging for parenting students to attend classes if they do not have access to other child care options. Four-year institutions are more likely to have on-campus care than community colleges. Additionally, most institutions of higher education do not offer child care for student parents but rather for faculty and staff.
Child care is very expensive in the United States, and in thirty-nine states and the District of Columbia, the average cost of child care is more expensive than in-state tuition. So parents with young children face higher costs for their education. This may explain why single mothers in particular are more likely to withdraw before completing their degree which leaves them with higher debt loads but lower economic returns.
Predatory Institutions Compound the Problems
Enrollment in for-profit higher education institutions continues to grow as new and returning students seek educational opportunities that fit into their lives, fueled in part by marketing campaigns that imply that for-profit colleges will “fast track” both the admissions process and the program of study. Students and their families make huge investments in higher education no matter what type of institution, but those who attend for-profit institutions often find little in the way of economic rewards. In addition, billions of dollars in federal government funds goes to for-profits every year; of all the students attending four-year for-profit institutions in 2020–21, 62.2 percent were federal grant recipients, no doubt a testament to the fact that these institutions enroll a disproportionate number of low-income students. Significant portions of the federal funds these colleges receive are used for the companies’ advertising and marketing efforts rather than instruction.
This sub-par return on investment at for-profit institutions hits women harder than men because undergraduate and graduate enrollment at for-profit institutions is disproportionately female and low-income. For-profit college students are also more likely to be older students, including those who previously attended college and then discontinued their studies and also student parents. These students are less likely to complete but more likely to borrow student loans. Not only are socioeconomically disadvantaged students more likely to enroll in the for-profit sector, the institutions themselves contribute to and exacerbate these disadvantages due to the much lower return on investment of a degree or credential from a for-profit institution, compared to public and private nonprofit institutions. Given the disparate outcomes of for-profit college students, why are the most vulnerable and marginalized students enrolling at these institutions? The same gender, wealth and income inequality that pushes students to pursue higher education makes them susceptible to targeted marketing and recruitment materials. For-profit schools are known to routinely engage in targeted recruitment and enrollment of students of color.
Targeting advertising of high-cost, low-value postsecondary programs to low-income students and students of color is sometimes referred to as “predatory inclusion.” By locating themselves in wealth-deprived communities, which often lack other postsecondary educational programs, for-profit colleges minimize the geographic barriers to college. While the students they serve may see this nearness as a tremendous benefit, the relationship between student and institution may not be totally symbiotic. Students in low-wealth, low-income communities—including racialized minorities and those with dependents—may qualify for a considerable amount of financial aid, from which the for-profit institution can generate revenue. Students take on high amounts of debt for degrees that frequently, in the end, have little payoff for them but large financial compensation for the education provider. And who are the students most likely to be victimized by predatory for-profit institutions? Nearly one in five student parents attend private, for-profit institutions. Likewise, nearly one in five of post-9/11 GI Bill beneficiaries are enrolled in for-profit institutions. It’s worth noting that compared to Latine students attending nonprofit institutions, those enrolled at for-profit institutions experience worse outcomes.
The overrepresentation of women of color in the for-profit sector is especially concerning given their disparate short- and long-term higher education outcomes and may be a contributing factor to the difficulty they have in reducing their student debt. Black women in particular report the lowest loan payoff rate for education debt and report the highest levels of stress surrounding student loan repayment. The typical Black student loan borrower reports a negative net worth into their 30s even as the typical white borrower has broken even by then. Black borrowers see almost no reduction in their student loan balances even decades after entering repayment.
Recently, women have become the majority of graduate degree recipients. In the academic year 2021–22, women received 62.6 percent of master’s degrees and 57 percent of doctoral degrees. And likewise, women of color tend to be overrepresented among advanced degree recipients from for-profit colleges—meaning they disparately feel the ill effects of sub-par for-profit programs. In October 2024, a federal court in Maryland approved a class action settlement in a lawsuit filed by former Walden University students accusing the institution of targeting women and Black students for its doctorate of business administration (DBA) program then overcharging them by arbitrarily requiring students complete additional credits at a substantial financial and personal cost. Victims of predatory institutions are often left with tremendous debt burdens that cannot repay. If they default on their loans, it hurts their credit, and they can face years of garnished wages, seized tax refunds, not to mention difficulty borrowing to pay for a car or house, and can face further obstacles if they try to attend another institution to finish their education. Thankfully, in addition to settlements like the one described above, there is debt relief available to borrowers who were defrauded by their institution or attended colleges that closed before they completed their course of study.
Debt Relief Is Critical for Closing the Wealth Gap
Most graduates with federal student loans begin repaying their education debt at the same time they commence their working careers. Because women are paid less than men, they experience a lower economic boost from their degrees and face unique challenges in repayment. In general, women are in student loan repayment longer than men due at least in part to the fact that women with lower earnings make smaller monthly payments than men with higher earnings.
Strengthening borrower protections in the federal student loan program and for those with private loans is critical for supporting borrowers, particularly borrowers of color, during this difficult time as they transition from learners to earners. Borrowers need more flexibility and relief during repayment, especially those facing dire economic consequences. During the late 1990s and 2000s, the federal government introduced a number of debt forgiveness programs, but these pathways to debt relief are limited and inefficient.
In addition to the relief available to students who were defrauded or misled by their institutions, borrowers have several avenues to reduce their monthly payments and eliminate portions of their debt balances. There are currently four income-driven repayment (IDR) plans administered by the U.S. Department of Education that are available to borrowers with federal student loans. As of June 2024, more than 13 million borrowers were enrolled in a repayment plan. Generally, the payment amount under an IDR plan is based on a varying percentage of the borrower’s discretionary income. Most IDR plans require borrowers to make consistent monthly payments that amount to 10–20 percent of their discretionary income for a period of twenty to twenty-five years. Saving on a Valuable Education (SAVE), the most recently introduced IDR plan, which protects the most income by basing monthly payment on a smaller portion of the borrower’s adjusted gross income (AGI), is no longer taking new applicants following a federal court issued injunction. SAVE, which replaced the Revised Pay as You Earn (REPAYE) program in 2023, was an important lifeline for low-income borrowers. One of the plan’s most generous benefits is that borrowers do not see their balances grow while in repayment because the Department of Education pays any interest not covered by the borrower’s monthly payment.
Unfortunately, several states have mounted legal challenges that would block federal student loan borrowers’ access to SAVE; these lawsuits also pose a threat to other IDR and loan forgiveness programs. As of July 1, 2024, the Department of Education stopped enrolling borrowers into two of the IDR plans, Income Contingent Repayment (ICR) and Pay As You Earn (PAYE), (although the department may open these plans back up for enrollments in response to developments in the litigation). The legal challenge has made it difficult for borrowers to enroll in or change IDR plans. The department is still enrolling borrowers in Income Based Repayment (IBR), the only plan where eventual forgiveness is protected by law, but that plan requires significantly higher payments than SAVE. Additionally, under IBR, borrowers may continue to experience negative amortization; that is, the amount owed may go up even as a borrower is making payments. Because women face the dual challenges of high debt burdens and employment discrimination, they may be more likely to rely on the protections afforded by IDR and the Public Service Loan Forgiveness (PSLF) program (see below), meaning they are disproportionately hurt by losing access to the best IDR options. Additionally, under IBR, borrowers may continue to experience negative amortization; that is, the amount owed may go up even as a borrower is making payments. Because women face the dual challenges of high debt burdens and employment discrimination, they may be more likely to rely on the protections afforded by IDR and PSLF. Black borrowers with a bachelor’s degree are more likely to be enrolled in IDR than other racial groups. IDR plans play an important role in helping low-income and low-wealth borrowers manage their debt by lowering their payments and keeping them out of default, but borrowers’ interest and balance can continue to balloon even if the remaining balance is eventually forgiven.
In 2007, Congress passed a law creating the PSLF program, promising debt forgiveness to student loan borrowers who made regular student loan payments and did public service work for a period of ten years. PSLF requires the borrower to make at least 120 on-time monthly payments before they’re eligible for relief. Not only do women make up the largest share of graduate degree recipients, but they also are overrepresented among workers with graduate degrees in education and public service. Unfortunately, making full monthly payments with a low-wage job and meeting other requirements of the PSLF program can be difficult.
In late 2022, the Department of Education announced several permanent changes to the PSLF program that will provide more flexibility around “qualifying payments” shortening the pathway to debt relief for many borrowers. However, there are still a number of borrowers, particularly women borrowers, who are artificially locked out of relief. Despite the Congressional intent, the department’s PSLF implementation has prevented many borrowers from reaping the benefits of the program. Countless borrowers have been misled by loan servicers who didn’t fully understand and follow the law, while other borrowers were steered to less advantageous options, such as entering economic hardship forbearance, and others were denied because of the department’s regulations interpreting the law. At present, whether a borrower qualifies for forgiveness under PSLF is based on their loan payments and the legal status of their employer, not the job the borrower actually does.
Early educators and child care providers are one group that is predominantly composed of women, provides a critical public service, is paid low wages that make it difficult to repay loans, and yet large swaths of these workers have historically been excluded from PSLF. Recent data show that 76 percent of early childhood educators have either a postsecondary credential or a professional certificate such as a child development associate credential. Furthermore, a new survey from RAPID found that more than one in five child care providers had student loan debt, with the average level of debt ranging from $26,000 for a center-based teacher to $109,000 for family, friend, and neighbor providers. Expanding eligibility for borrowers such as early educators and child care providers would not only meet the statutory intent of the program in the first place, but would also have the added benefit of supporting the economic well being of a sector that is primarily made up of women and women of color.
Looking Ahead
Wealth is essential for the health and well-being of individuals and their families. Breaking families out of cycles of debt is a necessary step toward building an equitable society where all individuals and families have a chance to thrive. Student debt relief in particular is critical for addressing the compounding challenges faced by Black and Latine women and meeting the promise of higher education as a means for reducing the racial and gender wealth.
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Tags: student debt, wealth inequality, wealth gap