Black women are among the largest demographic to earn college degrees. However, it must still be understood that systemic racism and the wealth gap also means that many of these women will face barriers to degree completion, including financial challenges, student debt, and balancing education with family responsibilities.
New changes to student loan repayment programs are poised to disproportionately affect Black female borrowers. According to the Student Borrower Protection Center, Black women hold a disproportionate share of the $1.7 trillion in student loan debt, have higher average balances than any other demographic, and are the demographic most likely to see debt spiral out of control.
In an article from the Associated Press, one borrower noted that a letter from their loan servicer meant a higher payment despite enrolling in a relief program during the pandemic. “They said I now have to pay $358 per month,” Kat Hanchon said. “I’m not going to be able to pay that. … But I’m not unusual in the world we’re living in right now.” The situation means that borrowers will begin to see lower credit ratings as they have to prioritize which bills they do or don’t pay.
Recent changes include a pause on student loan forgiveness for those enrolled in the Income Based Repayment program. “Currently, IBR forgiveness is paused while our systems are updated to accurately count months not affected by the court’s injunction,” the department noted in a statement. “IBR forgiveness will resume once those updates are completed.”
Another change is the end of the SAVE Plan which was a forbearance program that is now defunct with borrowers in the plan expected to see their debt grow with interest accruing again as of Aug. 1, according to CNBC. The outlet notes that “A typical borrower could see their federal student debt grow by $219 a month in interest charges alone if they stayed put in the payment pause and make no payments.”
With all of that in mind, even the US Department of Education has tips that could help borrowers navigate the changing landscape.
Pay more than your minimum payment.
Making payments over and above your minimum payments can reduce the amount of interest you pay over time. StudentAid.gov advises that borrowers contact their loan servicer to inquire how to pay off their highest interest loans first.
Make automatic payments.
Some student loan servicers provide an interest rate deduction for automatic payments. Utilizing auto debit will also ensure that the loan is paid on time and can improve credit ratings.
Use “extra money” to make additional payments.
Bonuses, tax refunds, and other surplus dollars can go a long way toward diminishing the principal of your loans.
Consolidate and refinance your loans.
Consolidation of your loans into one with a lower interest rate can save a significant amount over time.
Avoid defaulting on loans.
Rehabilitating loans is one option. To rehabilitate a defaulted Direct Loan or FFEL Program loan, you must agree in writing to make nine voluntary, reasonable, and affordable monthly payments (as determined by your loan holder) within 20 days of the due date, and make all nine payments during a period of 10 consecutive months.
Ultimately, major changes in policy and public perception of student loan forgiveness and reasonable repayment programs may be years off. It will require the understanding that racial and ethnic variations in student loan debt and repayment are the result of socioeconomic factors and not of inherent personal failures.