African American and Hispanic borrowers take on more debt and then struggle to pay it back, noted Frotman, who formerly served as a lead regulator overseeing student loan markets at the federal Consumer Financial Protection Bureau.
“That has large implications across their financial lives,” he added. “Access to credit, to buy a house or a car. Student loans, which were meant as an avenue supposedly to chase the American dream, are actually leaving these communities further and further behind.”
Despite the dramatic increase in student borrowing in the Bay Area, the rate here, of 12.2%, is actually lower than the average rate in California (13.9%), and significantly less than in the rest of the country (17.9%), according to the report. But, it’s authors note, “our research finds that Bay Area and even county-level trends mask dramatic disparities among communities throughout the region.”
Student borrowing has spiked nationwide in large part because more people are attending college and tuition at many institutions, particularly state schools, has risen exponentially.
The research breaks down student debt by ZIP code and finds some of the heaviest levels of borrowing in San Francisco, Marin and San Mateo counties. But when it comes to delinquency — when payments are late or overdue — rates are significantly higher in low-income communities of color.
One of the most striking examples of this, according to the report, is in Solano County, where the student loan delinquency rate is nearly 17 percent, the highest among the Bay Area’s nine counties, despite it having the lowest level of educational attainment.
Top 10 Bay Area ZIP codes with the highest percentages of student loan borrowers who are 90+ days delinquent (March 2018)
Source: FRBNY Consumer Credit Panel/Equifax Data; American Community Survey (via Student Debt in Bay Area report)
“So the people who are really worse off are ones who go to some school, go for a couple of years and it just doesn’t work out. Life happens,” Frotman said. “And now they have no comparable wage growth but are stuck with this debt. And those are borrowers where you see significant default rates.”
He added, “The sheer increase in the amount of borrowers struggling in these counties is astronomical.”
The report also highlights East Oakland’s Coliseum neighborhood, where nearly one-third of borrowers are at least 90 days past due on their student loan payments. Defaults there are generally highest among borrowers with less than $9,000 in debt.
“When students default, it hurts their credit and slows down their ability to get ahead, buy a home,” Frotman said. “But beyond that, we are now seeing the impact of this collective debt on communities.”
