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Report: Latinx Students More Averse to Student Loan Debt

Latinx students have a greater aversion to taking on student loan debt than their White peers, according to a new study by the civil rights group UnidosUS in partnership with the University of North Carolina (UNC) School of Law and the UNC Center for Community Capital.

The report, “Debt, Doubt, and Dreams: Understanding the Latino Completion Gap,” explores how different barriers impact completion rates for Latinx students, with an emphasis on student attitudes toward debt.Student Debt

While Latinx students are going to college at “historic rates,” their graduation rates lag, said co-author Kate Sablosky Elengold, an assistant professor of law at UNC. About 43 percent of Latinx students earn a degree within six years of enrollment compared to 68 percent of White students, according to a 2017 Georgetown Center on Education and the Workforce study.

That’s “quite a big differential between Whites and Latinos in terms of completion,” Sablosky Elengold said. “We started with the question, what is the cause of that?”

The report’s authors decided to test a narrative, backed up by research, that Latinx communities are more debt averse than their White counterparts. They wanted to know if this applied to student loan debt, as well, and if so, what that might mean for fostering Latinx student success in the future.

The study surveyed 1,500 students, ages 18 to 40, and 35% were Latinx. The study found that, even though these students were borrowing less to pay for college, they reported feeling more stressed about debt than their White counterparts.

Researchers stressed that it’s an understandable reaction On applications for federal financial aid, almost half of Latinx students have an expected family contribution (EFC) of zero, and 70% are first-generation students.

It’s possible that communal debt aversion leads Latinx students to borrow less than they need to finance their education in a system heavily reliant on student loans, the report notes. And as a result, they may end up making up the difference in ways that cause added stress, like working more hours.

But the authors also emphasized that, while debt aversion is higher for Latinx students, the report does not conclude debt aversion is a cause of non-completion – and simply encouraging these students to borrow more isn’t the solution. Rather, debt aversion plays into a host of environmental and financial barriers faced by Latinx students as they work toward earning their degrees.

Amanda Martinez

“The debt aversion piece is nuanced,” said contributor Amanda Martinez, an education policy analyst for UnidosUS. “You can’t just blame [Latinx completion rates] on debt aversion,” because it “speaks to deeper financial insecurities throughout Latino students’ lives.”

The report also delved into what specific stressors lead these students to stop out of college. Latinx students were more likely to cite environmental barriers – like family responsibilities – and financial barriers – like the cost of college, fear of debt or the need to work more hours – as the reason they didn’t complete their degree, compared to their peers. Transportation problems ultimately emerged as the primary environmental obstacle for Latinx students.

Those findings have policy implications, which are detailed in the report, as well. For one thing, policymakers can tackle completion gaps for Latinx students by addressing the high cost of college, disproportionately a barrier to graduation for Latinx students. One option the report presents is having an expected family contribution formula that accounts for “negative EFC,” the financial support that students provide their families. Another is a reassessment of what “living expenses” means for the purposes of financial aid. In the study, Latinx students more often lived at home compared to their peers and were more likely to be contributing financially to their household’s needs, an unaccounted-for expense. It also lists expanding grant programs – and emphasizing the difference between federal loans and grants – as a possible help for a debt-averse community.

To the authors, focusing policymakers’ attention on Latinx student retention feels particularly important as enrollment rates drop amid the COVID-19 pandemic.

“We are concerned as an organization,” said Martinez. She worries “all the gains made by Latinos in the past two decades are just going to be basically wiped out for the next decade, and who knows even how long it’ll be until we’re able to recover. [Students’] families are being affected,” and family concerns play a major role in Latinx students’ decisions about higher education, according to the research.

For the future, the report’s authors plan to add qualitative data to their study, conducting 25 to 50 in-depth interviews with Latinx survey respondents, as well as policy experts, to flesh out what debt-aversion and its associated barriers look like for students on the ground. The plan is to release a comprehensive report in summer 2021.

This dual approach is one of the advantages of an academic and community organization partnership like this one, said co-author Jess Dorrance, managing director of the UNC Center for Community Capital. Latinx students are a part of a “larger fabric of supports and people and institutions” and this project is designed to take that into account.

Using both kinds of data “helps to answer slightly different questions,” Dorrance added. “It helps you uncover things that aren’t necessarily obvious looking just at quantitative data points. I love that this partnership and this project is willing to take that kind of broad look and use different methods to really try to answer these questions more fully, because I think that’s really important to truly informing policy solutions or other kinds of interventions.”

Sara Weissman can be reached at sweissman@diverseeducation.com