Minorities hardest hit by student debt during recession

Student loan debt affected people’s ability to pay their bills and meet their basic needs during the Great Recession – and the burden of that debt was placed disproportionately on black and Latino families, according to a news report. study.

The study, published recently in the journal Social currents, found that student debt universally increased the risk of financial stress during the recession, regardless of race. But black and Latino families with higher student loan debt experienced more financial stress than their white counterparts with the same level of debt.

“People who were already financially stressed before the recession were in a much worse situation to begin with,” said Elisabeth martin, a doctoral student in sociology at Ohio State University and lead author of the study. “But when we looked at other metrics – particularly the amount owed – we found that black and Latin households began to face higher levels of financial stress at lower debt levels than white households. . “

For this study, the researchers analyzed data from 2007 to 2009 Survey of Consumer Finances, a survey of American families and their finances.

Researchers assessed the responses of nearly 3,900 households in the 2009 survey. These surveys answered questions about the previous year, which was in the midst of the Great Recession from 2007 to 2009. Some of the questions included whether the household was behind on a loan or mortgage payment, if expenses exceeded income, if respondents had credit card debt and if they took out a payday loan. The researchers considered a household “financially stressed” if the family experienced at least one of these circumstances.

They analyzed four different measures of student debt: whether a household held student loans, the amount the household owed, monthly payments, and the percentage of a household’s income spent on student loan repayments.

The study focused on households with less extreme financial problems, Martin said, providing a unique opportunity to see how student loans affected families who might otherwise consider themselves financially stable.

They found that when households owed less than $ 20,000 in student loans, the risk of financial stress was equal among black and white households. But when families owed $ 20,000 or more, black families were more likely to experience higher levels of financial stress. Hispanic and white families also experienced levels of financial stress similar to lower debt levels. But when families held $ 80,000 or more in student debt, Hispanic families were more likely to experience financial stress.

“For everyone, just having a student loan increases the risk of financial stress, but for white households, owing more money on the loan doesn’t change if they are under financial stress,” said Martin.

“For black and Latin households, you see that having student loans increases financial stress during the recession, but they also have these increased risks of financial stress with higher amounts of money owed, more than white households. And this is really important, because black families in particular are more likely to have student debt than white families, and are not able to repay their student debt to the same extent as white families.

“I think what we’ve found, as a whole, is that student debt isn’t just a middle class and white person’s problem. This is a disproportionate problem for blacks and Latinos, especially when larger sums of money are owed.

Previous research has shown that as state and federal governments pay less for the cost of higher education, families in the United States have incurred more student debt. Martin said this study shows that while higher education is often worthwhile, the burden of student loan debt is especially heavy during the inevitable “shocks” of the US financial system.

“Even just a few decades ago, governments paid most of the costs of higher education, and that has changed,” said Martin. “And often, economically, you don’t know you’re in danger until something happens that reveals that risk, and that’s exactly what the Great Recession did. This revealed the vulnerability that was already there for most people.

Funding for this research comes from the National Science Foundation and the National Endowment for Financial Education. Rachel Dwyer, a sociology professor in the state of Ohio, is also a co-author of this study.

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