Student loan debt weighing down young Latinos
From a young age, Iliamari Vazquez knew how important it was to get a college education. So right after she graduated from high school, she…
Iliamari Vazquez earned her master’s degree in social work from Arizona State University in May. She’s now pursuing a master’s degree in public administration. By the time she graduates next year, she’ll owe about $80,000 in student loans. (Courtesy photo)
From a young age, Iliamari Vazquez knew how important it was to get a college education. So right after she graduated from high school, she went straight to Arizona State University.
At 32 years old, shes now pursuing her second masters degree. But her education hasnt been cheap. By the time she graduates with her masters degree in public administration next year, shell have close to $80,000 in federal student loan debt.
Im extremely nervous and extremely anxious, Vazquez said in an interview with VOXXI about graduating and paying off her student loans.
Its something that I know I have to pay back and think about later, she added, referring to her student loans. But I know that my education is worth more than the anxiety that I have right now.
(Source for data: Federal Reserve Bank of New York)
SEE ALSO: Obama signs bill to lower student loan rates
Vazquez is among the growing number of Latinos who are taking out student loans in order to pay for their college education. Numerous studies and reports show Latino and African American students are especially saddled with student debt.
One recent study by the FINRA Investor Education Foundation looked at the student loan debt accumulated by millennialsyoung Americans born between 1978 and 1994. It found that 36 percent of Hispanics have student loan debt, compared with 49 percent of African Americans, 34 percent of Asians and 32 percent of whites.
So how much debt are young Americans shouldering? A survey released this month by the Federal Reserve Board found that the average amount of student loan debt held by young American familiesthose headed by someone younger than 40 years oldis $28,900, nearly double what it was in 2001.
Today, about 40 million people are collectively carrying $1.12 trillion in outstanding student loan debt in the United States, up from about $260 billion in 2004. Student loan debt now surpasses credit card and auto loan debt and is second only to mortgage debt.
For-profit colleges bury students in debt
Education experts say the dramatic increase in student loan debt can be attributed to a number of factors, including the soaring cost of tuition and the consistent decline in state funding for higher education.
When looking specifically at Latinos, experts say one reason why so many Latino students are incurring student loan debt is because more of them are attending for-profit institutions. These colleges and universities are run by private, profit-seeking businesses.
(Source for data: The College Board)
Very frequently our Latino students are getting hounded by these for-profit colleges that are increasingly expensive and are having students take out a lot of loans for degrees that, in many cases, are not good degrees and are not getting students placed into good jobs, Sarah Audelo, policy director for the Center for American Progress Generation Progress, told VOXXI.
SEE ALSO: Beware of loan practices at for-profit colleges and universities
Audelo added that what ends up happening with some Latino students who attend these pricier colleges is that they drop out, because they become overwhelmed by their growing student loan debt. As a result, they leave college with no degree and face a tougher time finding a job that will pay them enough money to pay off their student loans.
According to a recent research brief by the Center for Responsible Lending, Latino students are among those who enroll more frequently in for-profit colleges. The brief notes that because these colleges are more expensive, students become more heavily indebted than their peers at other schools.
Whats also troubling, according to the brief, is that a greater share of students who take out student loans to attend for-profit schools end up defaulting within their first few years of repayment than their peers who attend other types of schools.
Defaulting, which occurs when a person fails to make payments on a student loan on time, can have serious consequences. It can damage a persons credit rating, affect a persons ability to buy a car or house and lead to tax refunds being withheld.
Many Latinos lack financial literacy
Education advocates say another reason why Latino students are graduating with so much student loan debt is because many of them are not financially literate.
Vazquez told VOXXI that when she applied for her first student loan as an undergraduate student, she wasnt very confident about her knowledge of student loans.
I just knew that I wanted to get an education, she said, adding that she still believes getting a college education is worth it even with the daunting price.
(Source for data: FINRA Investor Education Foundation)
SEE ALSO: Lack of financial literacy keeps Latino immigrants in poverty
Deborah Santiago, co-founder and vice president for policy at Excelencia in Education, said that often times Latino students cant turn to their parents for financial advice. She said thats because many of them are also not well educated on the ins and outs of applying for student loans.
She said this is one of the reasons why high schools and colleges need to do a better job to ensure students are educated on student loans and other financial aid options.
I do believe that financial aid counseling is not of the quality and the strength it needs to be for Latino students to take out loans, Santiago said in an interview with VOXXI.
The lack of financial literacy is also seen among other young Americans. The study by the FINRA Investor Education Foundation shows that only 24 percent of all young millennials demonstrate high levels of financial literacy.
There have been efforts to help Latino students become more financially literate, including a partnership between the Hispanic Association of Colleges and Universities (HACU) and the American Student Assistance. In March, the two groups teamed up to raise awareness of a program that helps Latino students and alumni develop their financial literacy skills and better manage student loan debt.
Not being financially literate is an obstacle for Latino students, Luis Maldonado, chief advocacy officer at HACU, told VOXXI. Many of them may have limited experience dealing with financial services, companies, banks and lenders.
Paying off student loans could take years
For many students, paying off student loan debt could take yearseven decadesleaving them with less money to spend on other goods and services.
It impacts their ability to engage in other parts of their lifeto buy a house, to start a familybecause they have debt that they cannot manage with the income levels they start with when they graduate, Santiago said.
As graduation nears, Vazquez is hoping shell find a job in social work thatll pay her a starting annual salary of $40,000 so she can begin to pay off her student loans. Its not a lot but theres room for growth, she said.
Vazquez is also hoping shell eventually qualify for a loan forgiveness program for social workers that will discharge her remaining student loan debt after 10 years of full-time employment.
When asked how long she thinks itll take her to finish paying off her student loan debt, Vazquez replied: Realistically, Im not sure. I know its going to be several, several, several years because its so much.
SEE ALSO: Financial aid and student loans part-time college students qualify for
