Student loan debt
In general, filers in majority Black census tracts and filers in majority white census tracts were more alike than they were different in the kinds of debts they owed.
Less than 5% separated the percentage of total debt filers in majority Black and majority white areas owed to different kinds of creditors, such as collection companies, mortgage companies and tax collectors.
But Black and white filers were different in important ways.
Filers in predominately Black neighborhoods owed significantly more student loan debt than those in predominantly white neighborhoods. While filers in mostly white areas owed about 8% of their total debt as student loan debt, filers in mostly Black areas owed 14% — nearly double.
Lawless attributed this difference to the predatory practices of some for-profit colleges. Our data does not include the profit status of the universities attended by bankruptcy filers.
But other data supports Lawless’ claim. According to the Aspen Institute, for-profit colleges account for 45% of the higher education system. Black and brown students are more than three times as likely to attend for-profit colleges, and a majority of students at those colleges are students of color.
Likewise, other researchers have found that almost 60% of Black students who attended for-profit colleges in 2004 had defaulted by 2016.
For all filers, student loan debt was the second highest category of debt, about $26 million owed, according to our data.
While filers owe all sorts of debts, there’s really only one big-money debt: mortgages. Our 2,000 bankrupt filers owed about $64 million in mortgages.
Filers living in majority white neighborhoods owed the bulk of that value, $36 million dollars. While the homes in majority white neighborhoods were about $20,000 more expensive on average, the higher mortgage debt owed in these neighborhoods is mostly caused by the larger number of white bankruptcy filers overall.
While average size of mortgage debt in white and Black neighborhoods was similar, the quality of those mortgages was not. In our data, one third of filers in mostly Black neighborhoods owed more on their homes than the home was worth. Just 21% of filers in mostly white neighborhoods faced the same situation.
These “underwater mortgages,” as they’re known, turn what should be a person’s most valuable asset into just another debt. If, for example, the owner of an underwater home sells their house, they receive none of that money, and must pay the difference to the bank.
Some academics attribute this to depreciating home values in Black neighborhoods. But in Georgia, that isn’t the case. By comparing the neighborhoods of our bankruptcy filers with mortgage information from those same neighborhoods, we found that it was the initial mortgage that caused the problem.
From the very beginning, the average mortgage in a Black neighborhood was worth 89.2% of the home’s value, while the average mortgage in a white neighborhood was worth just 85.8% of the home’s value. Likewise, interest rates in majority Black neighborhoods were, on average, 33 basis points (or .33%) greater than those in majority white neighborhoods. In concrete terms, the cost of a 30-year mortgage on a $300,000 home for a Black filer would be $526,614, as compared to $487,858 for a white filer.
Good debt, bad debt
While Black and white filers had more in common than not, filers at different parts of the income distribution were a different story. From medical debt, auto debt, mortgage debt, and student loans, wealthier filers owe “better” debt than the less wealthy.
Filers making less than $35,000 a year owed nearly double the medical debt compared with above-average-income filers. Below-average-income filers owed nearly triple the auto debt of wealthier filers. Neither medical debt nor auto debt is an appreciating asset.
Mary Hansen, professor of economics at American University, said “that’s the kind of credit (poorer people) can get.”
On the other hand, wealthier filers owed nearly quadruple the mortgage debt of poorer filers. While mortgages have their problems, homes generally appreciate in value, as opposed to medical loans and cars.
Race and class
Neither race or class fully captures the discrepancies in Georgia’s debts.
Even though filers living in majority Black areas, on the whole, owed more depreciating auto debt than those in white areas, wealthier filers in these areas owed less auto debt than poorer filers in mostly white neighborhoods; about 5% in Black areas and 9% in white areas.
Wealthier filers in mostly Black neighborhoods also owed about the same student loan debt as poorer filers in mostly white neighborhoods, while poorer filers in white areas owed 50% less on student loans than poorer filers in Black areas.
A statistical analysis accounting for both race and class, as well as other considerations, showed that:
- Black filers hold 25% more student loans than white filers
- Poorer filers hold 15% more medical debt
- Black filers hold 11% more debt in collections