When seeking graduate and professional degrees, African Americans take on over 50% more debt than white students. On the upside, African Americans also see a bigger payoff to earning such degrees. Whether or not that payoff is enough to make up for the additional debt burden is unclear.

These are some key takeaways from a study we released in January 2020 in the journal Sociology of Education that examined graduate school debt. We are researchers who study issues of inequality and disadvantage in education.

Our findings come at a time when there is an ongoing public debate about whether higher education is worth the cost. We believe these debates represent a paradox for African Americans who are seeking education beyond a bachelor’s degree. On the one hand, graduate school enables African Americans to climb into higher income brackets. But this upward economic mobility comes at a steep upfront financial cost.

Large differences found

For 2016, we estimate that the average white graduate student borrowed about US$28,000 while an average African American graduate student took out $43,000 to pay for their education, even when they had comparable levels of parent income, education and other resources important for educational attainment.

We found that African American graduates with an advanced degree had higher pay increases than their white peers – but not necessarily higher pay.

While a 2016 master’s degree graduate who is white could expect an 18% bump in earnings for their degree, African American master’s degree graduates could expect around a 30% bump in earnings compared to having a bachelor’s degree alone, according to our study.

Among doctoral degree holders, white graduates could expect around a 55% bump compared to a 65% increase in earnings for African Americans with doctoral degrees.

Among those with professional degrees – needed to become, say, an eye doctor or a lawyer – white graduates earned 120% more than their bachelor’s degree counterparts who were also white. By comparison, African American graduates earned 142% more than those with a bachelor’s degree who are African American.

It may be tempting to conclude that African American students should aim for an advanced degree. But the reality is more complicated than that. That extra bump African American advanced degree earners get simply puts their pay close to that of their white peers with the same degree. African American advanced degree holders are not typically making more than their white peers, even though they borrow much more to earn those degrees.

Let’s take the case of average white and African American advance degree graduates with identical incomes and identical monthly student loan payment amounts of $300. Given a constant 6% interest rate compounded monthly, it would take the average white student just over 10 years to pay off the principal and interest of their $28,000 in student loans. By contrast, it would take the average African American student 21 years to pay off the principal and interest of their $43,000 in student loans with the same $300 rate.

For these reasons, taking on large amounts of student debt may perpetuate racial inequalities across generations. For instance, debt can make it more difficult for highly educated African American parents to support their own children’s educational aspirations. If a person who has a child right after graduate school invested $300 per month to their child’s college fund versus paying off their own student debt, with a 4% rate of return they could expect to have roughly $44,000 toward their child’s college education in 10 years.

The bigger picture

With student debt nearing $1.6 trillion dollars nationally, people worry that student debt is the next financial bubble that could topple the U.S. economy. They also worry that student loans may be financially crushing an entire generation.

But our research suggests that when it comes to the nation’s $1.6 trillion student debt problem, it pays to look beyond just student loans for four-year degrees. We found that nearly half the nation’s student debt is held by households where at least one member has an advanced degree. These are households that typically enjoy relatively high incomes.

For that reason, any talk about student loan debt should take into account the debt held not just by people with four-year degrees. If disparities in student loan debt are going to be addressed, they must be addressed among people who hold graduate degrees, too.

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The authors do not work for, consult, own shares in or receive funding from any company or organization that would benefit from this article, and have disclosed no relevant affiliations beyond their academic appointment.