One of the newest findings is that higher education is not exactly providing what it it meant to and it is not preventing minorities from stability when it comes to their financial situation. In fact, studies show that middle-class Hispanics and African Americans are continuing to fall behind when it comes to making their loan payments, thus leaving them drowning in debt and having a difficult time paying off their student loans.
In fact, a study performed by the Washington Center for Equitable Growth performed analysis that took a specific zip code, the median income level, and the average student loan balance and their results yielded that minorities are those with the most past due loans. The study also revealed that areas where there are minorities in large groups show the same results. Some of the cities tested included Compton, Huntington Park, and Lynwood.
Another surprising result from a similar test showed that communities that had a lower level of income often had the highest number of student loan delinquencies. In addition to this, the data showed that most people who were in default carried a loan balance of $5,000 or less.
[Check out this related article: Study Reveals Racial Disparities in Student Loan Debt]
Marshall Steinbaum, a research economist, has stated that he believes the problem is not with poverty, but with structural racism, which prevents Hispanics and African Americans from an equal distribution of the wealth. This thought is not too far off from what data shows either. For example, Hispanic and African American homes have only a small fraction of the same wealth the Caucasians do and it is much harder for minorities to climb up the ladder of economic opportunity including things such as home ownership.
Those who lived in minority neighborhoods, really took a hit when the housing market crashed simply because minorities are often forced into mortgages with higher interest rates, which places them into homes they are unable to afford. Due to the market crash, these homes lost their value leaving the minorities upside and under water in their homes. Since there is not an equal distribution of the wealth and same opportunities, they are stuck in these homes that are diminishing in value while still paying a high price for them.
Studies conducted by the Federal Reserve Bank located in St. Louis revealed that when the housing market crashed, Hispanics lost about 72 percent of their net worth from 2007 until 2013 and African Americans lost about 60 percent.
When it comes to college, these minorities do not have the tuition saved up in an account and they rely on student loans to help them go to school. In fact, four out of every five African Americans that head to college need to take out a student loan before they could even attend college. When these students are unable to get the job they need after college, they end up defaulting on their student loans, because let’s face it, there are more important things to pay for such as food, clothing, and housing.