The Student Loan Repayment Restart Will Deepen Economic Inequality

Forbes

09-05-2025

Student Loan Repayment Will Affect Black Women Most, Understanding The Double Bind Of Race And Gender In Student Debt
A federal student loan repayments resumed at the beginning of the month after a prolonged pause due to the pandemic, millions of Americans face a daunting financial reckoning. According to the Department of Education, nearly 43 million borrowers owe more than $1.6 billion in loan debt. A majority of borrowers are not current on their payments, and it's estimated that 10 million borrowers, representing a quarter of the federal student loan debt portfolio, will be delinquent within a few months. The Office of Federal Student Aid's plans to address this include garnishing the wages of those who are unable to make payments.
This moment exposes not only the immediate challenges borrowers face but also the deeper, systemic failures embedded in our higher education and economic systems. The crisis is not simply a matter of individual responsibility or financial mismanagement. Instead, it is the result of decades of policy decisions and structural inequities that have driven the soaring cost of education, entrenched racial wealth disparities, and perpetuated a transactional model of access that favors the privileged few over the many.
Over the past several decades, the cost of higher education has risen dramatically, far outpacing inflation and wage growth.
According to the Education Data Initiative, the average annual cost of tuition increased by over 36% for four-year public universities between 2010 and 2023 — the years when many borrowers who are about to begin repayments attended school. This increase is minor in comparison to public tuition rates when Baby Boomers started attending college, with the inflation-adjusted price of tuition jumping nearly 200% since 1963. This steep rise in costs has pushed students and families to rely heavily on loans to finance college, disproportionately impacting low-income students and students of color who lack generational wealth or other financial safety nets. The California Department of Financial Protection and Innovation reports that 90% of Black students and 72% of Latino students in the state take out student loans, compared to 66% of white students, highlighting how borrowing is not just a financial decision, but a racialized necessity.
Black women, in particular, bear the brunt of the student debt crisis. They hold the largest share of student debt among any demographic group, with an average federal undergraduate loan balance a year after graduation of $38,800, which rises to $58,252 for those who pursue graduate degrees. Despite this significant investment in their education, Black women face persistent and specific wage disparities. Economist Michelle Holder's research led her to dub the uphill battle Black women face financially as the 'double gap,' — since they are subject to both the racial and gender wealth and income gaps in this country. Holder predicts that over the course of a 40-year career, this double gap can amount to almost $1 million lost in pre-tax earnings that could have otherwise been used to finance a college education or pay down debts.
This wage gap is compounded by the fact that many Black women attend college while supporting extended families and juggling caregiving responsibilities; approximately 40% are mothers during their studies, the most of any group. Their disposable income is often stretched thin, directed toward family needs rather than wealth-building or loan repayment.
The consequences of this debt burden stay with Black borrowers far longer. Twenty years after entering college, the median Black borrower still owes 95% of their original loan balance, while the median white borrower has paid off nearly all of theirs. This stark disparity deepens the racial wealth gap, which is already staggering. When student debt is factored in, Black households hold only 5% of the wealth of white households, down from 15% when excluding debt. This means that student debt is not merely a singular financial burden, but a mechanism that perpetuates systemic racial inequities like the ability to own a home, pass on generational wealth, or just maintain a healthy emergency savings account.
The institutional nature of these disparities is furthered by the role of nepotism and legacy admissions in higher education. These practices favor applicants with family connections and family wealth, effectively treating access to education as a transactional privilege rather than a universal right. We see this in a study published by the Bureau of Economic Research, which found 70% of Harvard's legacy admissions were white. This entrenched favoritism ensures that those from affluent backgrounds continue to secure educational opportunities, while marginalized communities are left to navigate an increasingly costly and exclusionary system. The result is an inequitable cycle where wealth begets opportunity and opportunity begets more wealth — leaving others trapped in debt and diminished prospects.
For borrowers currently struggling with consumer prices that are more than 20% higher than before the pandemic, the resumption of student loan repayments is a financial cliff. Aggressive collection efforts, such as wage garnishments, are likely to lead many to D183CA
turn to payday loans and other predatory financial products to cover basic living expenses. As I've covered here before, the payday loan industry alone extracted $2.4 billion in fees from low-income borrowers in 2022, with average annual percentage rates (APRs) that can top 500%. These loans trap vulnerable borrowers even further in cycles of debt — compounding economic instability and widening racial and gender wealth gaps.
This crisis is not isolated to student loans; it reflects a broader government and private sector failure to invest in equitable education, fair wages, and robust borrower protections. As a report funded by the nonpartisan Annie E. Casey Foundation recommends, policymakers could intervene in a number of ways, including passing better protections against predatory lenders and expanding access to more affordable community college programs. According to the study's authors, the business world can also implement a win-win strategy, using student debt payments as an incentive to attract talent.
Until systemic reforms such as these are enacted, restarting student loan payments will not only burden individual borrowers but also perpetuate entrenched racial and economic inequities. The current moment offers a critical opportunity to rethink and rebuild a more just and inclusive system that values education as a pathway to opportunity for all, not a debt trap for the many and already overburdened.