At $1.73 trillion dollars, student loan debt has now surpassed credit card debt, according to a recent CNBC story. With a drastic effect on the ability of younger generations to keep up, student loans have come to the forefront of many political, economic, and social discussions and studies in recent years. It is very easy for some to say the student knew what they were doing when they took out the loans. However, that sentiment does not take into the vast disparities among borrowers, and the question always remains, “How did we get here?”
Disparity in Age
The first and most obvious disparity in student loans is between generations. In 1985, the average cost of private law school tuition for ABA approved schools was $7,526 in 1985 dollars, the Law School Transparency Data Dashboard reports. Adjusting for inflation, that cost would be $17,520 in 2018. While inflation has played a large role in the increasing cost of attending law school, the bigger culprit has been the increased tuition rate between 1985 and 2018. The average cost of private law school tuition in 2018 was $47,754 (i.e. 2.7 times more expensive than it was in 1985). Many scholars blame this drastic increase in debt on decreasing public funding and the ability of private schools to continuously raise their tuition with no repercussion and often times no justification except to say that tuition increases every year by the same percentage no matter what.
To compensate for the significantly increased cost, Millennials incurred drastically increasing amounts of student loans, which will take them considerably more time to pay. That extra time to pay often translates to less investment in retirement and home ownership. With the cost of education continuing to rise, the disparity in student loan debt amongst older and younger Americans will continue to increase, unless something drastic is done to control costs.
Disparity in Gender
According to the American Association of University Women, “women who graduated in the 2007-2008 school year have only paid off an average of 33 percent of their student debt”, while men have paid off an average of 44 percent of their debt during the same time frame. This is an 11 percent disparity amongst genders, who were all employed full time. The numbers are even more extreme when considering the rate of debt repayment for Black and Hispanic women.
There is no more important factor in the debt repayment disparity among genders beyond salary, which is creating an almost insurmountable wage gap for women. When women make $0.77 for every dollar a man makes, it makes it much harder for women to meet their financial goals, particularly if they are single mothers. Financial concerns also make women more risk-adverse causing them to, perhaps, take a safer job with lower pay.
Finally, despite composing almost 50 percent of law school classes, women law school graduates are not typically recruited or hired on at large firms, and even if they are, they are not likely to remain long enough to make partner, which would increase their income to pay off their student debt.
Disparity in Race
However, the starkest disparities in student loan debt and repayment occur when considering race and ethnicity. An estimated 86.8 percent of black students borrow federal student loans to attend a four-year public college, as opposed to 59.9 percent of white students, according to the National Center for Education Statistics (NCES). Black and African American college graduates owe an average of $25,000 more than their white counterparts, and four years after graduation, black students an average of 12.5 percent more than they borrowed. Regarding debt repayment, the AAUW Study found the gap even more pronounced for black and Hispanic women. Compared to the 37 percent of debt paid for white women, Black and Hispanic women had only paid 9 percent and 3 percent respectively, even though they were fully employed.
One might ask why is there such a large gap in student loan debt by race? One key reason is income and the lack of generational wealth in black and Hispanic families, which means they often times may have no college savings or parental help through school. Low-income post-law school may be due to larger numbers of lawyers of color working in the public sector compared to the private sector or even failure to negotiate a better salary for fear of jeopardizing their job offers. Black and Hispanic students are not typically recruited into the big law firm environment and often work in the public sector for little pay. Even if they receive a big firm offer, they often do not remain with large firms because they often feel isolated or unsupported.
With lower incomes, Black and Hispanic students frequently are only able to afford an income-based plan, which will more likely than not increase their total loan debt by almost two times the original amount borrowed thanks to compound interest. Further, student debt relief programs like the Public Service Loan Forgiveness have benefited relatively few borrowers. As of October 6, 2021, only 16,000 of the millions of borrowers were eligible for forgiveness. Black and Hispanic lawyers, many of whom counted on these forgiveness programs, are now facing years of payments due to low income and compounded interest over the life of their loans if the system cannot be fixed.
Now that we have an idea of how student loans affect different borrowers, stay tuned for future articles on how we can fix the problems now that we know their origins.
Valerie Fontenot is an Associate with Frilot, LLC. She practices in the firm’s Medical Malpractice & Healthcare section. Her practice is based in litigation of civil matters, particularly the trial and appeal of health care matters, including medical malpractice defense and regulatory and compliance. Valerie has significant experience in the litigation and appeal of general liability cases in an array of areas, including high value motor vehicle accidents. Valerie’s areas of experience have provided her numerous opportunities to interact with many expert fields including medical causation, vocational rehabilitation, life care planning, bio-mechanics, and economics.