This paper uses stratification economics to study intergroup disparities among student loan borrowers. Today, approximately 44 million Americans hold around US $1.7 trillion in student loan debt, with over 20% of borrowers in default. Over one million borrowers fall into default annually. The authors find that Black and first-generation students have lower college completion rates, default more often on student loan debts, and gain less of a wage premium from their college degrees and graduate degrees compared to white graduates. They also find significant racial and class differences in household wealth generation among college graduates. The authors use the most recent data from the Federal Reserve Bank of New York’s Consumer Credit Panel and the Survey of Consumer Finances to study the changing size and distribution of student loan debt and default rates based on race and class. What they find is that the student loan debt system creates significant debt traps for many Black and first-generation students.
