Race & Economic Disparity
By the end of 2020, federal student loan debt in the United States surpassed $1.7 trillion, increasing by over 100% in the last decade. While this has become a national crisis impacting nearly 45 million borrowers, Black women are the most heavily burdened. A 2020 report by the AAUW indicates that Black women, on average, hold over $37,000 in loans each, compared to $31,346 held by white women, and $29,862 held by white men. As a whole, Black women, despite being the most institutionally educated demographic in the U.S., have a total of $35 billion in student loan debt. Furthermore, 57% of Black female college graduates indicate that they struggle to repay their student loans. While white borrowers are able to pay back an average of 10% of their total student loan debt each year, Black borrowers are only able to pay an average of 4% back, largely due to racial pay disparity.
The Racial Wage Gap
The United States as a whole grapples with an inequitable wage gap, as those at the top 5% of American earners have experienced disproportionate wage growth compared to middle- and low-income workers; however, the Black community faces their own hurdles in obtaining equitable pay. While wages for Black workers grew in 2019 for the first time since the Great Recession, the overall gap between white and Black workers has grown larger almost every year since 2000. As of 2019, the median wage of Black workers was 75.5% of their white counterparts.
Given the intersection of race and gender, Black women face the greatest hardship as a result of this racial wage gap. Despite making up the highest proportion of women in the U.S. labor market throughout history, Black women have always faced systemic barriers to equitable pay. Prior to the 1970s, Black women were largely barred from employment outside of the agriculture and domestic service industries; despite the dismantling of a handful of hurdles in the workplace, 50 years later, over 25% of Black women are employed in the service industry, compared to under 18% of white women. Likewise, last year, over 48% of white women were employed in management and professional industries, compared to just over 40% of their Black counterparts. As a direct result of occupational segregation, Black women are underrepresented in some of the highest paid industries in the U.S., making up only 1% of the engineering industry and 3% of the computing industry. This has direct consequences, given that Black women make, on average, 61 cents for every dollar paid to their white male counterparts, translating to over $23,000 less in earnings over the course of a year.
The Racial Wealth Gap
This racial wage gap quickly translates into a racial wealth gap; the Federal Reserve reports that white families have the highest median and mean net worth in the United States, totaling $188,200 and $983,400, respectively. Meanwhile, Black families have the lowest net worth, at $24,100 in terms of the median and $142,500 in terms of the mean; this is less than 15% of white families’ net worth. Furthermore, generational wealth is highest among white households, as nearly 30 percent report having received an inheritance, and nearly 72 percent report being able to obtain $3,000 from family or friends for a financial emergency. On the other hand, only 10% of Black households report having received an inheritance, and under 41% report the ability to acquire the same $3,000 in an emergency. This seemingly endless cycle contributes to meager financial literacy rates, particularly among Black women, who only have a 35% financial literacy rate, the lowest of any demographic in the U.S..
Intersection of Problems
The student loan crisis contributes to and reinforces this racial wealth gap. In light of the Great Recession, states made the decision to cut their higher education budget; over ten years later, funding for public colleges has not been restored. Meanwhile, college tuition costs have increased exponentially, causing students to take out higher amounts in student loans; many of these students have to seek out high-interest and predatory private lenders. Families of color watched their net worth drastically diminish during the Great Recession, with little economic recovery for them in the decade to follow; this means that students, particularly Black women, find themselves unable to build or rely on generational wealth while attending college and in the years that follow. Furthermore, after graduation, Black students are five times more likely than white students to have to default on their student loans. Those who don’t are often subject to higher interest rates and monthly payments, which hinders their ability to save money and build their own wealth.
The Prosp(a)rity Project
The intersectional discriminations that Black women face in their day-to-day lives creates systemic barriers to career advancement, financial wellness and generational wealth. The Prosp(a)rity Project, a nonprofit organization founded in 2020, works to empower Black women and girls in the U.S. with the tools for financial, professional, entrepreneurial and holistic success. The organization seeks to be the first point of contact for Black women seeking to live more abundant and prosperous lives.
Taking aim at eradicating the $35 billion in student loan debt held by Black women, as well as the 35% financial literacy rate, The Prosp(a)rity Project launched the Economic Empowerment Initiative (EEI) in June 2020. As part of the EEI, the organization welcomed 22 Black women across a variety of industries, becoming the organization’s first cohort of “Prosperettes” (beneficiaries). The Prosp(a)rity Project has committed to raising the funds to relieve the entirety of the student loan debt held by its Prosperettes. Furthermore, the organization will connect its Prosperettes with personalized financial and career coaches, allowing them to become more financially literate and positioning them with the career trajectory needed to build generational wealth. In return, The Prosp(a)rity Project asks that Prosperettes pay it forward by mentoring or sponsoring a future Prosperette, or by volunteering with the organization.
Although conversations around federal student loan forgiveness have entered the mainstream over the course of the last several years, progress toward that ideal seems murky at best. Between mixed signals from federal government and the common tendency to sweep the student debt crisis under the rug, the fact of the matter is that this is a problem that will not go away for the vast majority of borrowers any time soon. Given this, The Prosp(a)rity Project aims to break the cycle that exists among student loans, the racial wage gap, and the racial wealth gap. Addressing the root issues of financial insecurity that Black women experience rather than merely covering up symptoms of those core aspects is the only way to go about achieving parity.