Unlike most forms of monetary aid, student loans are based on need. Generally, credit scores and the likelihood of repayment as based on past history are not taken strongly into consideration. Instead, there is enough evidence that a college education increases incomes to make repayment likely. For this reason, it is very important to ensure that debt does not cause problems with your school plan.
As more and more funding becomes available for college education (a record $29 billion last year), there is a chance that college debt may swamp the least wealthy of students. Ironically, the most financially challenged students are the same students the system was intended to help. As President Harry Truman fittingly said of banks, “You have to prove you don’t need the money, to borrow some.”
Similarly, there are differences in student loans between minority students and non-minority students that make it imperative especially for minorities to tread carefully upon student loans. For example, while all rates of aid have increased since 1990, aid to white students has gone up by nine percent, while aid to minority students has gone up by 19%.
More seriously, while a non-minority student can expect to graduate college with a loan debt of around $20,000, the average minority student who does not even finish college can expect a debt of $30,000!
Congress has been busy cutting funds and making student loans more expensive, largely on the basis of increased borrowing rates. It might be time for private businesses like minority-run companies and credit counseling agencies to save the day. Urban Trust Banks is one example of a private lender that targets loan programs specifically for urban students and for students at historically black colleges.
Native American schools also are producing and promoting better support systems and culturally appropriate debt skills for students. Many tribes have special funding for their enrolled students.
Sallie Mae is the country’s number one lender to college students. As an interesting example of diversified services for students, Sallie Mae recently has introduced new services for both Hispanic and African American borrowers.
2Futoro is a comprehensive bilingual program that attempts to speed understanding and loan application processes for Hispanic applicants. Likewise, grants will be made directly to colleges to help recruit new Hispanic students. For African American families, there is a free major research tool (interactive CD) from Sallie Mae called “The Key” that thoroughly explains relevant student finances.
The potential problem of debt, which is responsible for a decrease in minority students from undergraduate rolls, has major implications. Even graduate schools are beginning to worry that minority groups will become under-represented.
The American Medical Association, the leading medical research group for education, reports that while minorities (African American, Hispanic and Native American) now make up almost 25% of the total population, they represent less than 12% of the enrolled medical school population. The number one reason cited by qualified minority candidates for choosing not to attend medical school is debt.
Counselors increasingly are studying the factors that underlie minority students’ debt problems. Many colleges and universities now have offices specifically for minority students and will offer help in finding grants instead of loans.
There are several key objectives that can be implemented and utilized to improve the financial situations of students -- minority students in particular.
- There may be a lack of financial models and on-campus support for students. Counselors, parents and students should encourage that debt counseling and budget planning either be offered or required both for undergrads and grads.
- Successful workshops can be conducted with minority peers about avoiding too much debt and loan default.
- Early entry programs can be implemented to encourage more college “survival skills”.
- Special funding programs that allow forgiveness of debt have been utilized by the Native American health services program and the Department of Health and Human Services (although these programs are always under budget attack).
- Federal Pell grants (not loans) are available for students whose family income is under $40,000. Currently, only 49% of minority students receive these grants. If the need is there, families should pursue these grants more aggressively.
- Encouraging participation in work study programs is a method of both easing debt and of promoting community inclusion.
The needs of minority students likely may not be any different from the needs of other students, but if a family is in need of assistance, there are programs that can help minority students attend, and pay for, college.