Texas students at public universities are taking on more debt than state leaders consider manageable, with black students facing the biggest financial challenges, according to a new study.
State and national leaders want to reel in the student debt crisis and ensure that college graduates can afford the loans they take out to earn degrees. Texas set a goal for student debt load to be no more than 60% of a student’s first-year earnings by 2030.
But on average, Texas students borrowed $25,794, while their starting salaries were about $34,132. That equates to a debt-to-income ratio of 74%, according to the study by Southern Methodist University. And when parents’ loans were factored in, that ratio jumped to 92%.
But black students had debt-to-income ratios of 117% compared with 68% for white students and 71% for Latino students.
That hints at other factors complicating the student-debt crisis, such as racial pay-gap inequities. The study’s findings bring into sharp focus the challenges officials face when considering how to hold colleges more accountable for student success.
“My primary concern is that while accountability for institutions is important, it is really critical that they are not sanctioned or punished for educating certain types of students,” said Dominique Baker, an assistant professor of education policy at SMU and the study’s author.
Currently, universities don’t face any penalties when their students take on too much debt. But state and federal officials have hinted at the possibility that they’d consider policies to do so by, for example, tying funding to student outcomes.
In March, President Donald Trump issued an executive order telling the U.S. Department of Education to come up with policy proposals that would hold colleges accountable for student success. Trump also ordered the department to report more information about college graduates’ income and debt levels based on degree and certificate programs.
Baker’s study, published in June and publicized this week by SMU, tracked students who started school between 2004 and 2008 and earned a bachelor’s degree from a public Texas university within six years. Baker noted that the public universities that had the highest averages for debt burdens were those that had significantly higher rates of black and Latino student enrollment.
She found that black students were more likely to take on higher amounts of debt than their peers, even when compared with students whose parents had similar education levels or whose families had similar income, according to the study.
Of students who took out loans, blacks borrowed an average of $33,598. White students borrowed an average of $25,286 while Latinos borrowed an average of $23,983.
While the study doesn’t look into why debt ratios vary significantly, it echoes findings from other studies on pay inequities. Last year, the Pew Research Center reported that blacks earned, on average, about 65 cents for every $1 whites earned while Latinos earned about 64 cents.
“If the state is interested in trying to incorporate something like debt burden into accountability for institutions, then a big caution is that the state may need to take into consideration the enrollment makeup of the institutions,” Baker said.
Young Invincibles, a nonpartisan advocacy group for millennials, consistently receives reports from graduates who say they didn’t get enough information on the front end to ensure that they could manage student loans.
That’s why the group successfully lobbied for a new Texas law that abolished a provision that allowed state agencies to not renew professional licenses for teachers, social workers, nurses and others who defaulted on student loans.
But state and federal officials need to do more to help keep debt under control, including with better consumer information on borrowing as well as providing more help for contributing stresses such as textbook and health care costs, said Fedora Galasso, southern regional director.
“There is just this huge fear about the amount of debt that they are accumulating,” Galasso said. “We need to increase the federal and state investment in higher education to ensure that students have support.”