Student Debt and Race: Closing the Gap in the Workplace

For decades, a college degree has been touted as a golden ticket for the American Dream. 

But for the majority of Americans, going to college means taking out student loans — loans that turn into debt that can take decades to repay. 

And for people of color, the long-term financial consequences of that diploma often wind up pushing the American Dream even further out of reach. 

Black, Latino, Asian, and Native American borrowers are more likely to have more debt, accrue more interest, remain in debt longer, and default on their student loans — a culmination of longstanding systemic inequities that, in turn, perpetuates the cycle of barriers to economic stability, financial mobility, and ultimately intergenerational wealth. 

By the numbers: student debt, race, and wealth

• 90 percent of Black students and 72 percent of Latino students borrow to pay for school, compared to 66 percent of white students 
• At 49 percent and 41 percent respectively, Black and Native American student loan borrowers have dramatically higher default rates than white borrowers (22 percent), fueling the racial disparity in Americans who report having poor or no credit
• Black college graduates are significantly more likely to financially support their parents, whereas white college graduates are significantly more likely to receive financial support from their parents to buy a home or continue their education
• Half of white college-educated heads of household under age 35 own their home, compared to less than a third of their Black peers
• The rate of white employees who participate in a workplace retirement plan far exceeds (58 percent) that of Black (41 percent) and Latino (32 percent) employees; meanwhile, a quarter of workers who are eligible but not enrolled in their employer’s retirement plan cite student debt as their main barrier to participation 

Finding a solution

To be sure, completely closing the racial gap in student debt and wealth equality will require profound changes in federal and state policy. 

But until these institutional changes become reality, employers can take steps to narrow the gap from within the workplace.

Tracking benefit adoption by race is a simple but powerful step employers can take to identify shortcomings in the impact of financial wellness programs.  Pay transparency practices help address racial and gender disparities in compensation — and are particularly beneficial to Black women, who carry the heaviest student debt burden and earn forty percent less than white men.

But the most immediate path to supporting people of color with college debt in the workplace is, by far, student loan benefits. 

By offering tools that enable employees to better manage their student debt and by pitching in to help them pay it off faster — through direct sponsored repayment contributions, or by matching employees’ student loan payments with retirement contributions — employers will make a difference across every employee demographic, and especially those who are disproportionately burdened by student debt.

In fact, our analysis shows that Candidly disproportionately serves employees of color on our benefit platform:

• When compared in proportion to all degree holders in the US, a Candidly user is twice as likely to be Black or Latino
• Women account for two-thirds of Candidly users who are people of color, demonstrating the power student loan benefits have to reach a critical population at the intersection of gender and racial wealth disparity
• To date, Candidly is on track to help employees of color eliminate $195M in student debt and reduce their time spent in repayment by 20,400 years