Ibrahim Gardner
Student loan debt is a significant issue for graduates of historically Black colleges and universities (HBCUs), who often face higher debt burdens than their peers at non-HBCUs. This disparity is due to various factors, including racial wealth gaps, declining investments in higher education, limited resources, and economic barriers experienced by African American students and their families. While there is no dedicated loan forgiveness program for HBCU students, recent initiatives by private donors and the Biden administration have contributed to millions in student loan cancellations. During the pandemic, federal stimulus funds provided much-needed relief, with the Department of Education investing in under-resourced colleges, including HBCUs, through the Higher Education Emergency Relief Fund. Additionally, some HBCUs have utilized private donations to wipe out current students' account balances, providing a fresh start for many. As the short-term relief measures come to an end, HBCU borrowers face ongoing challenges in building wealth, and policy reforms are needed to address the underlying issues and reduce the heavy debt burden carried by HBCU graduates.
| Characteristics | Values |
|---|---|
| Student loan debt | HBCU students borrow nearly twice the amount of student loan debt as their peers at non-HBCUs |
| Racial wealth gap | Black college graduates owe an average of $25,000 more in student loan debt than white college graduates |
| Federal funding | HBCUs are using federal funding and private donations to wipe out current students' account balances |
| Private donations | HBCUs have received significant private donations, including a $15 million gift from MacKenzie Scott |
| Loan forgiveness | There is no formal loan forgiveness program for students at HBCUs, but the Biden administration has contributed to millions in student loan cancellation |
| Wealth-building | HBCU students are nearly twice as likely as non-HBCU students to take out federal loans, impacting their ability to build wealth |
| Default rates | HBCU students are more likely to default on their loans and face consequences such as wage garnishment and credit problems |
| Income-driven repayment plans | IDR plans can reduce monthly payments, but it may take up to 25 years for the remaining balance to be erased |
| Public service loan forgiveness | Working in public service can lead to loan forgiveness, but it may take longer for HBCU alumni |
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What You'll Learn
Federal stimulus funds
HBCU students often graduate with large amounts of debt. According to a report by think tank Education Reform Now, 90% of graduates at VSU and another HBCU, Norfolk State University, finish college with debt, and half of them owe more than $40,000. The Brookings Institution found that Black graduates are five times more likely to default on their student loans than white graduates. Moreover, Black graduates, on average, earn less than their white peers, even with a college degree.
In light of these disparities, several HBCUs have used federal stimulus funds to pay off student balances. For instance, Virginia State University (VSU) and Virginia Union University (VUU), two HBCUs in the Richmond area, directed nearly $8 million in federal funds to this initiative. VSU used $1.4 million to cancel the balances for students enrolled during the pandemic, benefiting around 1,200 students. VUU, meanwhile, used $6.35 million to assist 1,300 students in debt relief. Norfolk State University, another HBCU in Hampton Roads, contributed $2.5 million in federal funds to help 1,255 students.
The use of federal funds to erase student debt has been a significant relief for HBCU students. VSU student Lacura Johnson, who received an email notifying her that the university would use federal funds to clear her $1,600 balance, expressed the impact of this initiative, stating, "People can't pull $1,000 out of their pocket. It's not easy." Another VSU student and football player, Zion Dean, shared a similar experience, describing how federal funds wiped away the $1,000 balance he owed from the previous school year.
Morehouse College, Florida A&M University, and Dillard University are other HBCUs that have joined this movement to clear tuition balances for students using funds from the CARES Act. The CARES Act, passed in March 2020, allocated $1 billion specifically to HBCUs and Minority Serving Institutions. Over 20 HBCUs across the country have utilized these funds to support their students in debt repayment.
The efforts of HBCUs to address student debt through federal stimulus funds not only alleviate financial burdens but also contribute to the broader discussion of closing the racial wealth gap. Canceling student debt is advocated by many as a swift approach to diminishing the Black-white wealth disparity.
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$9.99
Private donations
In May 2019, billionaire Robert Smith established a grant to pay off the student debt for the graduating class of Morehouse College. Similarly, in April 2021, the U.S. Department of Education discharged $1.6 billion of debt for HBCUs, and in September 2021, entertainer Nick Cannon partnered with the United Negro College Fund and the Thurgood Marshall College Fund to cover the costs for students at several HBCUs. In May 2022, an anonymous donor eliminated the student debt for the graduating class at Wiley College, and the Debt Collective cancelled $1.7 million in debt for Black women at Bennett College.
Clark Atlanta University, a prominent HBCU, has received substantial support from private donors. The university received a $15 million donation from philanthropist MacKenzie Scott and a $1 million gift from the Chan Zuckerberg Initiative. This funding has helped Clark Atlanta University wipe out current students' account balances, providing relief to those struggling with student loan debt.
In addition to these notable donations, many HBCU students have benefited from grants and scholarships offered by various organisations. The Coca-Cola First Generation Scholarship, the UNCF/Koch Scholars Program, and the Frederick Douglas Bicentennial Scholarship Program are examples of need-based scholarships that HBCU students can utilise to reduce their reliance on student loans.
While private donations and scholarships help alleviate the financial burden on HBCU students, they are not a permanent solution to the underlying issues of student loan debt. There is a growing movement within HBCU education circles to advocate for systemic change and a future where student loan debt for African Americans, especially those attending HBCUs, is drastically reduced or eliminated.
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Loan forgiveness programs
While there are no loan forgiveness programs that specifically benefit HBCU students, there are several existing opportunities and programs that HBCU alumni can use to shed their debt.
Public Service Loan Forgiveness
Best for: HBCU alumni who work for a nonprofit or the government.
Public Service Loan Forgiveness forgives public servants' remaining federal student loan balance tax-free after making 120 qualifying payments. The program wasn't effective at first, but the Education Department created a temporary waiver that helped thousands of borrowers eliminate billions of dollars in student debt.
Income-Driven Repayment Plans
Best for: HBCU alumni with federal student loans.
You can still get your federal loans forgiven if you don't work in public service, but it will take twice as long. Income-driven repayment plans cap monthly payments at a portion of your discretionary income and erase your remaining balance after 20 to 25 years of payments.
Disability Discharge
Best for: HBCU alumni who suffer a physical or mental disability that prevents them from working full-time.
The federal government will cancel your remaining student loan debt if you become totally and permanently disabled, physically or mentally. To be eligible for a disability discharge, you must provide documentation from your doctor, the Social Security Administration, or the Veterans Administration proving your disability.
In addition to these programs, there have been several instances of private donors contributing to the cancellation of student loan debt for HBCU students. For example, in May 2019, billionaire Robert Smith established a grant to pay off the student debt for Morehouse College's graduating class. HBCUs have also received hefty stimulus packages as a result of the American Rescue Plan Act of 2021, which has allowed them to eliminate outstanding student loan debt.
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Racial wealth gap
The racial wealth gap refers to the significant disparity in wealth between white people and people of colour in the United States. This gap is exacerbated by the burden of student loan debt, which falls disproportionately on students of colour and their families. Black students are more likely to borrow for higher education than their white peers due to having fewer socioeconomic resources, such as parental and generational wealth, and less home equity to finance their education.
Data from the U.S. Department of Education indicates that around 86% of Black students take out student loans, compared to only 68% of white students. Black students also typically owe more, with Black borrowers taking out an average of $39,500 in loans compared to $29,900 for white students. This disparity compounds by 7% each year after students leave school, and the higher debt burden makes it harder for students of colour to focus on other financial goals like buying a home, paying off credit card debt, or saving for retirement.
The COVID-19 pandemic further widened the racial wealth gap, disproportionately impacting the finances of many Black Americans, including student loan borrowers. However, federal stimulus funds during the pandemic have enabled the U.S. Department of Education to provide funding to under-resourced colleges and universities, including HBCUs, to cancel student debt. Private donors have also contributed to student loan cancellation for HBCU students. These efforts are important steps towards narrowing the racial wealth gap and advancing racial and economic justice in the United States.
While there is no formal loan forgiveness program specifically for HBCU students, there are income-driven repayment plans that cap monthly payments at a portion of the borrower's discretionary income and erase the remaining balance after 20 to 25 years. Additionally, President Biden has proposed cancelling some student loan debt for borrowers earning below an annual income threshold, which could help address the racial wealth gap. However, critics argue that more needs to be done to fulfil his campaign promise to address the racial wealth gap through student loan forgiveness.
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HBCU student debt crisis
Students at HBCUs borrow student loans at higher rates and graduate with substantially more debt than their peers at non-HBCUs. Black college graduates owe an average of $25,000 more in student loan debt than white college graduates, and over 50% of Black borrowers say their net worth is less than what they owe in student loans. This disparity compounds by 7% each year after the borrowers leave school, making it difficult for them to achieve other financial goals like buying a home, paying off credit card debt, or saving for retirement.
The Covid-19 pandemic has disproportionately impacted the finances of many Black Americans, including student loan borrowers. However, the pandemic also brought about federal stimulus funds that enabled the U.S. Department of Education to invest in under-resourced colleges and universities through the Higher Education Emergency Relief Fund, including more than $2.6 billion to HBCUs. This funding has allowed many HBCUs to wipe out current students' account balances, including tuition and fees, and give them a fresh start.
In addition to federal funding, private donors have also contributed to HBCU student loan cancellation. For example, billionaire Robert Smith established a grant to pay off the student debt for Morehouse College’s graduating class, and philanthropist MacKenzie Scott donated $15 million to Clark Atlanta University.
While these efforts have provided much-needed relief for HBCU students, the student debt crisis at HBCUs persists. President Biden has pushed over $9.5 billion in student loan relief since taking office, but it has not been enough to make a significant difference given the scale of the debt. Biden also promised to forgive all federal student loan debt for HBCU students who earn less than $125,000 annually, but this has not yet been implemented.
The student loan crisis at HBCUs is a complex issue that requires a range of solutions, including increased funding for HBCUs, federal loan forgiveness programs, and private donations. Addressing this crisis is crucial for narrowing the racial wealth gap and ensuring that HBCU students can pursue their dreams without being burdened by overwhelming debt.
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Frequently asked questions
Yes, HBCU students do have to pay off their student loans. However, there have been several instances of student loan debt cancellation and forgiveness for HBCU students over the past few years.
HBCU students borrow nearly twice as much in student loans as their peers at non-HBCUs. Black college graduates owe an average of $25,000 more in student loan debt than white college graduates.
HBCU students, many of whom are first-generation college students or come from low-income families, face various challenges in repaying their loans. These include racial wealth gaps, declining investments in higher education, limited institutional resources, and other economic barriers. As a result, a significant number of HBCU graduates have taken less desirable jobs, avoided pursuing additional education, and delayed major financial decisions such as buying a home.
There are a few options available for HBCU students struggling to repay their federal student loans. These include income-driven repayment plans, loan rehabilitation and consolidation, and public service loan forgiveness. Additionally, private donors and organizations have contributed to student loan cancellation for HBCU students in the past.
