New CSS Report Documents Impacts of Student Loan Debt Across Age, Income and Race/Ethnicity

Report findings overlap with introduction of federal legislation establishing education debt consumer assistance programs nationwide

More than a quarter of New Yorkers living in poverty last year reported that they, or a member of their household, had student debt. An even greater share of moderate- and high-income households reported having student debt. When factoring in age, the percentage of New Yorkers with student debt, aged 45 to 54, was similar to those between the ages of 25 to 34. This means that an increasing number of older adults with student debt will potentially carry that debt well into retirement, putting them at greater risk of financial hardship.

Those are among the findings of a new Community Service Society (CSS) report, Mitigating the Growing Impact of Student Loan Debt. Drawing on data from the 2021 Unheard Third survey, titled “Whose Recovery? Addressing the Needs of Low-Income New Yorkers,” the report illustrates how student debt is impacting households across age, incomes, and racial/ethnic groups.

Yet, according to the report specific categories of borrowers, including Blacks and Latina/o/x, low-income individuals and those who did not complete their college degrees, are most harmed by student debt. The hardships these borrowers face because of their debt make it difficult to build wealth, save for retirement, purchase a home, and improve their financial security. To help mitigate the impacts of student debt, assist borrowers with getting on track to greater financial health, and address some of the root causes of student debt, the report makes several recommendations:

• Expand eligibility for New York State’s Tuition Assistance Program (TAP) to make public college more affordable to low and moderate-income students;
• Pass state legislation (S.4461A/A.5843A “The New Deal for CUNY”) restoring free tuition for in-state students at the City University of New York);
• Pass federal legislation (H.R. 8643 The Student Loan Literacy Act of 2022) establishing and funding nonprofit student loan debt consumer assistance programs;
• Amend the U.S. Bankruptcy code to allow student loan debt to be more easily discharged in bankruptcy court;
• Reform federal loan repayment programs including making re-enrollment into Income Driven Repayment plans automatic and exempting Social Security benefits from offsets to pay off defaulted student loans.

“Student loan debt is a crisis in New York and across our nation, creating financial hardships for borrowers, perpetuating generational poverty, and choking the economic potential of millions of people in our country burdened by these loans,” said David R. Jones, CSS President and CEO. “This crisis is most harmful to low-income, Black and Latina/o/x, older adult and first generation college students. But we can do something about it, starting with passing legislation at the state and federal level to reduce the costs of attending public universities, and funding education debt consumer assistance programs to give borrowers the resources and guidance they need to make smart decisions about their student debt.”

Release of findings from the Mitigating Impacts report coincide with the introduction this month of federal legislation setting aside $80 million to fund community-based, nonprofit student loan consumer assistance programs to assist borrowers with their federal student loan needs. Co-sponsored by U.S. Representatives Hakeem Jeffries (D-NY-08) and Jahana Hayes (D-CT-05), the legislation (H.R. 8643) is loosely modeled after EDCAP, a program CSS launched in 2019 and funded by the New York State Legislature. EDCAP (Education Debt Consumer Assistance Program) helps borrowers across the state with their federal and private student debt issues by providing free, unbiased, one-on-one consumer assistance with all aspects of loan debt, from determining the best repayment plan options to getting loans out of default to prevent involuntary collections and assisting borrowers apply for public service loan forgiveness.

Among the report’s key findings:

• More than a third (32 percent) of Black and a higher share (39 percent) of Latina/o/x households reported having student debt compared to 21 percent of White households.
• The highest rates of student debt were among Black women (43 percent) and Latina women (38 percent) compared to just 27 percent of White women.
• The majority of low-income New Yorkers with student debt do not have a four-year degree and often struggle to repay lower levels of debt, become delinquent and are unable to pay for necessities.
• Four out of every 10 low-income New Yorkers with student debt reported they or someone in their household was unable to finish or continue their education compared to 30 percent of those with moderate to high incomes.
• Low-income borrowers of color were especially vulnerable to loan delinquency or default. Thirty-five percent of Latina/o/x borrowers and 47 percent of Black borrowers had defaulted or were delinquent on their loan payments.
• Low-income borrowers face higher rates of economic hardships and are forced to make spending tradeoffs due to their student debt. A third of Black New Yorkers and 30 percent of Latina/o/x borrowers reported that this debt kept them from affording necessities in the last few years, compared to just 18 percent of White New Yorkers.

“The promise of higher education and the American Dream should not come alongside the crippling debt and related socio-economic consequences that are associated with the pressures of paying life long, mortgage-size debt payments for one’s education,” said Emerita Torres, CSS VP for Policy Research and Advocacy and co-author of the report. “Our latest analysis shows that low-income Black and Latino borrowers are among the most vulnerable to such pressures, and our recommendations chart a way forward that would provide all borrowers the supports and policies they need.” 

“The student debt crisis is not just the $1.7 trillion owed by 45 million Americans. The true crisis is that people are having to choose between paying their student debt or affording basic needs,” said Carolina Rodriguez, Director of EDCAP and co-author of the report. “To make it worse, as the findings of this report show, low-income borrowers and women of color are suffering the most and are most likely to fall into default on relatively low levels of debt. The government must implement common sense policy solutions. Turning a blind eye will only exacerbate this crisis and create new ones, harming the very same people our federal lending system was supposed to help in the first place.”

The moratorium on federal student loan payments is scheduled to be lifted at the end of this month. However, the Biden Administration is expected to announce an extension of the payment pause beyond Aug. 31. When the freeze on payments is lifted, some 2.4 million New Yorkers owing more than $98 billion in student debt will have to make payments again. One million of these borrowers reside in New York City where research shows that city neighborhoods with predominantly Black and Latina/o/x residents have default rates twice that of neighborhoods where these groups make up less than 30 percent of the population.

Robust financial aid counseling before and during college is crucial to helping students avoid falling into debt and emerging from college without the economic burdens that can limit their opportunities to save, build wealth and create financial mobility. Implementing the policy interventions outlined in this report can be equally effective in reducing student loan debt, both in New York and across the nation.

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