Black Borrowers Owe More Four Years After Graduation Than When They Started, While White Borrowers Owe 10% Less

Four years after completing a bachelor's degree, Black college graduates owe an average of 6% more than their initial loan amount due to negative amortization and interest capitalization, while white graduates owe 10% less than what they borrowed, creating a widening $25,000 post-graduation debt gap from an initial $7,400 gap at graduation. Why it matters: 86% of Black students take out student loans compared to 68% of white students, so Black graduates start careers with both more debt and lower median earnings ($56,030 vs. $70,000 for white graduates aged 25-34), so income-driven repayment plans that cap payments below accruing interest cause Black borrowers' balances to grow rather than shrink, so student debt suppresses Black homeownership rates below those of white high school dropouts, so the higher education system that is supposed to be the great equalizer instead widens the racial wealth gap with each graduating class. The structural root cause is that interest capitalization rules (triggered by entering repayment, exiting forbearance, failing to recertify IDR, or switching plans) compound disproportionately on borrowers whose lower family wealth forced them to borrow more, and whose lower post-graduation earnings make full interest coverage impossible under IDR.