CHICAGO (Reuters) - Shavondra Britton had a pretty typical high school experience.
“They focused all the time on going to college,” said the 21-year-old African American, currently a junior psychology major at the University of Illinois-Springfield.
But she had no help with the process: “I had to figure out the rest. How to pay was overwhelming,” she added.
Britton is the first person in her family to go to college. Her mother, raising three younger children on a clerical salary, cannot afford to contribute.
Despite receiving grants for low-income students, Britton will have about $35,000 in student loans when she graduates. “I might not pay it off until I die,” she said, “but I’m so passionate about what I’m going to do that I know I will do everything imaginable to succeed.”
Going to college has long been seen as the route into the middle class and touted as the great equalizer among the races.
The reality is more complicated for black college students like Britton. A new report from the Federal Reserve Bank of St. Louis describes a tremendous chasm in the wealth black and white college graduates have accumulated. It projects that the average black student today is likely to remain far behind white classmates as they build their adult lives.
A major problem: African-American students take on 68 percent more debt than white students, largely because they tend to come from families with far less in savings, home equity and investments, according to the report by Fenaba Addo, a University of Wisconsin-Madison assistant professor and scholar at the St. Louis Federal Reserve.
Then, laden with debt, young black adults cannot in turn buy homes, save for retirement or children’s education.
“One of the unintended consequences of rising college costs may be that the long unstable and fragile position of the black middle class will persist,” said Addo in her report.
The average net worth of black parents is $48,494, with half having no more than $9,498 in wealth from home equity, to cars, furniture and savings after subtracting debt, according to Addo. Yet, white parents’ average wealth is $174,871.
That difference has a huge impact on black students because they often must fend for themselves as they pay for college. According to the National Longitudinal Survey of Youth, recent black college students said their parents helped them with $4,200 for college, even though four years at a public university can easily run more than $100,000. White students received about $12,000 from parents.
The advantages carry over to life after college as well, with white parents more able to help their children with money if they run into financial trouble, said Addo. As a result, the white college graduates have built about $17,000 more in wealth than black graduates by the time they are 25, and the gulf between them continues to expand into their 30s.
There are ways to mitigate some of the impact of student debt, starting with the choice of the college in the first place:
* Do your homework
Families should think about costs and whether the course of education will lead to jobs that pay well enough, said Addo. That does not mean skipping college, but just working the system.
For instance, colleges with strong reputations and high sticker prices may not be out of reach, and may instead turn out cheaper because they offer more assistance for low income students.
A report by the New York Federal Reserve noted that the highest default rates – or students unable to pay back loans – happen among students who have attended for-profit colleges and community colleges. Results are better from four-year public or private non-profit colleges.
* Check graduation rates
Default rates on student loans are high among people who start college and do not get a degree. Families should check graduation rates and time in school - a fifth year in college means more loans and more time away from a solid job.
* Work cautiously
Students often work full-time or nearly full-time because they fear college loans, and as a result research shows they are exhausted and more likely to drop out of school. On the other hand, working 15 hours a week may be useful and manageable.
Experts say not to fear student loans as long as the total does not exceed the pay you are likely to get on your first job.
(The opinions expressed here are those of the author, a columnist for Reuters)
Editing by Beth Pinsker and David Gregorio