Study: Black College Grads Borrow 35% More

The story of financial inequality in the U.S. has many chapters on the different ways Black Americans suffer disproportionately. Whether it’s net worth, homeownership, income or some other factor, Black consumers often face challenging barriers to financial stability and wealth building.

While the student debt crisis has impacted entire generations’ ability to hit historically “normal” life milestones like getting married and having children, it continues to impact Black borrowers more. Not only do Black students borrow 35% more on average in student loans than their non-Black peers, but LendingTree researchers found that Black millennial bachelor’s degree-holders earn 22% less than non-Black grads.

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Key findings

• Black millennials with a bachelor’s degree earned less on average than other degree-holding millennials. Black millennials earned 22% less on average in 2019, outpacing their peers in just three states — Oregon, Maine and Alaska.
• The earnings gap for recent graduates widened in more than half of U.S. states. From 2014 to 2019, the earnings gap for recent graduates ages 25 to 29 widened in 28 states and the District of Columbia. The gap widened by more than 29 percentage points in Vermont, most of any state.
• Black students borrowed more in student loans than their fellow students. At four-year public schools, Black students and their families borrowed 35% more, on average, in the 2015-2016 academic year (the latest available data). Non-Black families contributed an average of $14,434 to their student’s education, more than double the $5,545 Black families contributed.

After graduation, Black millennials with a bachelor’s degree earn significantly less on average than their equally educated peers

As more jobs and industries began requiring bachelor’s degrees over the past few decades, the American zeitgeist has increasingly emphasized the idea that a college education is any student’s ticket out of poverty, low wages and an otherwise less-than-comfortable lifestyle.

The data shows a different story — particularly for Black students. Despite earning that invaluable bachelor’s degree, Black millennials — those ages 23 through 38 in 2019 — working full time throughout the year earned 22% less ($44,498 versus $56,731) than their comparably educated and employed peers. That percentage represents an income gap of more than $12,000.

Black millennials out-earned their non-Black peers in just three states, but the difference is minimal. Oregon, Maine and Alaska each recorded higher average earnings for Black millennial graduates than other workers, but only by an average of 2% — or roughly $1,200.

Worst wage gap leaves Black grads with half of peers’ earnings

LendingTree researchers found the worst wage gap for Black millennials was in Montana, where Black bachelor’s degree graduates working full time earn 50.3% less on average than non-Black workers. The $22,466 average income for Black bachelor’s degree-holders in Montana falls significantly short of the $44,632 that other grads take home.

Montana’s wage gap stands as a bit of an outlier. The next largest racial wage gap for millennials crops up in South Dakota, where Black earners take home 35.8% less, on average, than their peers — a bit closer to the average earnings gap of 31% among the 10 states with the most significant disparities.

The 10 states with the widest earning gaps for Black millennial bachelor’s degree-holders

Where wage gaps are narrow but not insignificant

Aside from the three states where Black graduates earn more than their peers, states with the smallest racial income gaps for millennials report an average 13% difference in non-Black graduates’ earnings compared to Black grads.

North Dakota, juxtaposing its sister state to the south, recorded the smallest earnings gap at 2.7%. Here, Black millennial bachelor’s degree-holders earn just $1,400 less on average than non-Black earners.

Like Montana, North Dakota’s wage gap is sizable in relation to the most comparable states, with the next smallest gap coming in at 10.4% in Maryland.

The 10 states with the narrowest earning gaps for Black millennial bachelor’s degree-holders

Earnings gap narrowing in some states, widening in most

Despite the racial wage gap remaining significant, 2019 earnings represent a step toward closing the wage gap in 21 states. Across these states, the racial earnings gap for younger Black millennials — ages 25 to 29 — closed by 16 percentage points on average between 2014 and 2019. Nationally, the wage gap for this group closed by just one percentage point.

LendingTree researchers looked at earners in this age group specifically to examine how people in similar career stages are being compensated, and whether conditions have improved for recent graduates.

Wyoming takes the top spot as the state that narrowed the earnings gap for young Black bachelor’s degree-holders between 2014 and 2019. In fact, recent Black grads in the Equality State surpassed their non-Black peers in earnings for 2019, with an average income more than double that of non-Black workers — $77,500, versus their peers’ average income of $37,608. Median earnings for Black grads in this state more than tripled between 2014 to 2019, while earnings for non-Black grads dropped slightly, helping close the wage gap.

No other state came close to shifting the gap as dramatically as Wyoming, but Maine and Oregon also saw the young Black worker demographic surpass their peers in income from 2014 to 2019. In North Dakota, Black workers were already earning 52.6% more than non-Black employees — a gap which grew slightly in the period examined.

Top 10 states where the earnings gap shrunk the most for recent Black graduates (bachelor’s degrees)

On the flip side, the wage gap in Vermont widened the most from 2014 to 2019, leaving young Black millennials 46.2% behind their peers — up from just 16.9% in 2014. While the change was not nearly as monumental as Wyoming’s, the nearly $18,000 difference between median Black and non-Black worker earnings is difficult to ignore.

The next states widened the gap at a similar rate to Vermont. The earnings gaps in Indiana and Iowa increased by 27.6 and 26.6 percentage points, respectively, between 2014 and 2019. Median incomes for young Black millennial workers in both these states were higher than non-Black workers in 2014 but fell behind dramatically by 2019.

Top 10 states where the earnings gap widened the most for recent Black graduates (bachelor’s degrees)

A smaller wage gap may not make up for college debt gap

The unfortunate truth is that even if all the racial wage gaps mentioned here ceased to exist, it’s likely Black college grads would still be struggling to catch up to their non-Black peers. After scholarships, financial aid packages and family contributions, Black students at public four-year schools still owed around $9,600 during the 2015-2016 academic year (the latest available data), more than triple the remaining balance for non-Black students.

As of 2016, average family contributions to college costs from non-Black families helped those students borrow 35% less in student loans than Black students. While Black families contribute an average of $5,545 toward their student’s education, non-Black families shelled out over $14,000, a whopping 62% more than Black families.

Though the dollar amounts borrowed by each demographic may not seem too disparate — $6,886 borrowed by Black students, on average, versus $5,089 by non-Black students — those student loan bills add up quickly over time. While non-Black students may find a salary right after graduation that helps them knock out that debt rather quickly, the data shows Black grads may have to look harder for high earnings or pace repayment much slower.

3 tips for managing the cost of college

The general advice to pay less for college and make more money after the fact is much easier said than done. Shifting the disproportionate financial burdens away from Black people in the U.S. will be even more difficult, but there are some ways for individuals to try to improve their situations.

• Comparison shop for a school. Choosing a college major can’t help you predict your income with certainty, but knowing what you want to study can help you save. For example, if you’re looking to pursue accounting, you can pit college and university accounting programs against each other, comparing their cost and their record of past student success.
• Stay local. If you’re unsure about what you want to study or you’re focused on saving money on your education, Pentis says to think local. “Community college can be the single most impactful way to trim your college costs, particularly if you can live at home and commute cheaply for those first two years,” he says. If you’d rather go straight to a four-year university, check out your in-state and public options, which tend to be much less expensive than out-of-state or private schools.
• Keep your expectations realistic. A college education might be one of the most expensive things for many consumers, but it’s an investment. Getting an idea of how much you will earn after college and comparing it to your cost to attend will help you decide whether a school of choice is a good investment for you. “You might hold the feet of financial aid officers to the fire, asking them about their program’s retention and graduation rates but also the average wages of recent grads,” Pentis says. “Once you have an idea of your projected income and your potential school costs, you should have a stronger grasp of whether student loan repayment would be realistic.”

Methodology

Analysts used microdata from the U.S. Census Bureau’s American Community Survey (2019 5-year estimates and 2014 5-year estimates) to compare earnings of Black millennials whose highest educational attainment is a bachelor’s degree to those millennials whose highest educational attainment is a bachelor’s degree but who don’t identify as Black. Additionally, these cohorts worked full time, year-round. Millennials are defined as those born between 1981 and 1996 (ages 23 through 38 in 2019).

Additionally, analysts used microdata from the National Postsecondary Student Aid Study hosted by National Center for Education Statistics to calculate the average out-of-pocket expenses for full-time students at four-year public colleges in the 2015-2016 academic year (the latest year available), as well as the amounts borrowed, for students who identified as Black and students who don’t identify as Black.