In February, the Student Borrower Protection Center (SBPC) released a report of an examination into the US student loan debt crisis which said HBCU students tend to be charged higher rates than what is normal.
The SBPC, a non-profit organization, examined the racial breakdown of a national educational and economic problem. The report painted a racialized portrait that had the SBPC accusing certain firms such as Wells Fargo and Upstart of “educational redlining”.
In coming to their conclusion, the SBPC authored fake backgrounds for individuals as graduates of HBCUs and the group found out that they were charged $3,500 more than usual on a $30,000 five-year loan.
The charges were even worse for those who attend majority-Hispanic universities like New Mexico State.
Kat Welbeck, a civil rights counsel at the SBPC, explained the problem saying, “It seems apparent when you do the side-by-side comparisons that where this hypothetical borrower went to school mattered in terms of how Upstart measured their creditworthiness, and that to Upstart there’s a penalty for attending an HBCU or HSI.”
Welbeck added that SBPC was going to bring the attention of lawmakers to the menace. For Welbeck, “[T]here’s no other explanation that we can really come to terms with other than the fact that where this borrower went to school mattered” to the lending institutions.
Both Upstart and Wells Fargo reportedly responded to accusations reiterating their commitment to fair lending practices to students.
Upstart CEO Dave Girouard told NPR, “Our entire mission and the reason we get out of bed every morning is to improve access to affordable credit. So we are absolutely supportive of the intent that credit shouldn’t be biased or unfair in any way.”
What the 2020 Election offers for the student loan crisis
The student debt crisis in the US is a decades-long problem that received recent national prominence due to the campaign proposals of Elizabeth Warren and Bernie Sanders. Debt from student loans stands at more than $1.7 trillion currently.
According to a study by researchers at Brandeis University, African-American college students are 20% more likely than white students to take out federal student loans. One in two Black borrowers default on their loan within 20 years.
Democratic presidential candidate Joe Biden is promising to give federal grants that would cover up to two years of tuition at private historically Black colleges and universities (HBCUs). Tuition at public universities and colleges would also be free for students who come from homes that make less than $125,000.
University and college graduates who make less than $125,000 annually will also have their federal student debts cancelled.
According to policy think tank Brookings, the Black median household income is just a little less than $42,000.
On his part, President Donald Trump has not spoken in favor of sweeping debt forgiveness or of attempts targeted at racial minority students. Rather, the president supports a $25 billion package that will offset 0.7% of the increasing debt stock.