Racial Inequities in Student Loan Repayment

Black and Hispanic student loan borrowers are more likely to have difficulty repaying their loans than their White peers and are also more likely to face barriers to completing degrees. This, coupled with other educational and economic barriers grounded in structural, historic, and disparate practices in the housing and labor markets, can make payments more challenging and lead to loan default.

The findings come from a Pew Charitable Trusts report issued in December that included a representative survey of student loan borrowers who first received undergraduate loans between 1998 and 2018, as well as a review of academic literature on the topic of student loan repayment and race. (Default, which occurs after 270 days of nonpayment, often triggers severe economic consequences for borrowers, such as seizure of tax refunds, wage garnishments, high fees, and a decline in creditworthiness.)

The report comes at a relevant time for policymakers because collections of defaulted loans will resume in 2025, after a pause that began in March 2020 because of the pandemic. This suspension on collections was part of a larger moratorium on federal student loan payments, which ended in October 2023. During the pandemic, many borrowers reported facing increased financial pressures, and as payments resumed last year, many expected to see both an uptick in their monthly bill totals—other than their student loans—and a decrease in their savings.

Pew’s research shows that the repayment system does not work effectively for a large number of participants. Over the past 20 years, half (50%) of Black and 2 out of 5 (40%) Hispanic student loan borrowers have had a loan default, compared with less than a third (29%) of White borrowers. Additionally, about three-quarters of Black (74%) and Hispanic borrowers (75%) who experienced default reported doing so multiple times, compared with 56% among White borrowers.

The report also found that the repayment difficulties that many Black and Hispanic borrowers encounter may be partly explained both by heavy financial burdens and by educational circumstances. For example, both borrower populations are more likely than their White peers to encounter challenging educational circumstances, such as being the first in their family to pursue a postsecondary degree or being limited to part-time enrollment; both can make it harder to navigate higher education. “Millions of borrowers have recently reentered the collections system for the first time in several years, and new defaults are set to begin occurring as early as summer 2025,” says Ama Takyi-Laryea, a senior manager on Pew’s student loan initiative. “Pew’s findings suggest that targeted changes to student loan default rules and requirements would be an important step in helping to address racial disparities in loan repayment and support all struggling borrowers.”

Pew’s research found three changes that could help these borrowers: enabling direct enrollment into an income-driven repayment plan, which bases payments on income and family size; reforming collections requirements—especially costly fees—that make it harder for borrowers to remain financially stable and repay their loans; and better matching borrowers with the right options for their circumstances.