Blacks and Latinos Will Suffer When the Student Debt Bubble Bursts

When the housing bubble burst, the resulting foreclosure crisis was a disaster for black and Latino families, who lost 53 percent and 66 percent of their median household wealth, respectively, between 2005 and 2009. As a result, the racial wealth gap is widening, with white households enjoying 18 times as much wealth as their Latino counterparts, and 20 times more than African-American households.
There is every indication that the bursting of the student debt bubble, like the housing bubble before it, is imminent. And when it happens, it will send shockwaves throughout the financial markets. People of color will be especially vulnerable.
Although education is widely viewed as a way up and a way out for poor, working-and middle-class students, the prohibitive cost of college tuition has created a virtual debtors' prison for many. Loan defaults and delinquencies are on the rise in America, and are only expected to worsen.
A recent report from Moody's Analytics says that tuition has doubled since 2000 -- that's a 10 percent increase every year -- causing student debt to accelerate during the recession. In contrast, other types of consumer debt such as mortgages, credit cards and auto loans have decreased sharply. Outstanding student loans have increased 25 percent since 2008. Student debt now exceeds total credit card debt, and is likely to reach $1 trillion this year, with the average debt for a bachelor's degree at $24,000.

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