Minorities and poor college students are shouldering the most student debt

WASHINGTON - A day away from crossing the stage at Montclair State University's graduation, Evangelia Stone reflects on her journey from community college, the "amazing" professors she met along the way and the $50,000 in student loans she took out to get a bachelors' in sociology.

Stone, the first in her family to graduate from college, qualified for the maximum award in Pell Grants, the federal program that provides money for the country's poorest students to attend college. The free aid was enough to cover all her costs at Atlantic Cape Community College in southern New Jersey, but it barely paid for a quarter of the more than $20,000 in-state tuition, room and board at Montclair. The school offered Stone no scholarships or grants, but she received several thousand dollars from the New Jersey Commission for the Blind and Visual Impaired. It wasn't enough.

"Nobody should have to spend this much money, period. But in-state students going to public universities ... the fact that I'm leaving with this much debt is absurd," said Stone, 25, who plans to pursue a master's degree in social work at Rutgers University this fall. "Higher education is supposed to be a public good, not just a private purchase that wealthy students get to enjoy."

Amid state cuts in higher education funding and modest increases in federal grant aid eclipsed by rising tuition, African-American, Latino and low-income students like Stone must borrow to get a degree, according to a new report from liberal think tank Demos.

Eighty-four percent of college students with Pell grants graduate from four-year public schools with debt, compared with less than half of students without the need-based grants, the report said. While less than two-thirds of white graduates from public schools borrow, four out of five black graduates take out loans for college. And black students who do borrow come out with more debt than their peers.

"We have now entered a new phase where student borrowing is now the primary way young people pay for college," said Mark Huelsman, a policy analyst at Demos and author of the report. "This shift places an unequal burden on communities that have historically been denied an opportunity to gain and leverage wealth."

He added: "While higher-income, predominantly white, households can hope to minimize borrowing by using tax-advantaged savings and investment accounts, home equity and other mechanisms, low-income households by and large cannot use these tools."

In the last few decades, the cost of college has outpaced inflation and wages. States reversed course on investing in higher education, and public colleges raised tuition to offset the loss of funding. Federal grant aid for low-income students, which students of color often rely on, barely covers a third of the cost of college, according to the Institute for College Access and Success.

Stone discovered the limitations of her Pell grant three semesters shy of graduation. Between her time at Pace University in New York, community college and taking courses over the summer, Stone used up all of the federal need-based aid she could receive. And that meant she had to borrow.

Using data from the Education Department and the Federal Reserve's 2013 Survey of Consumer Finances, Huelsman found that graduates with Pell grants borrow at far higher rates and higher amounts than their middle- and upper-income counterparts at two- and four-year institutions. That is regardless of whether they attend public or private colleges.

The trend of borrowing among those who can least afford it signals the erosion of decades of federal policy instituted in the 1960s to give needy students access to higher education. It's striking in light of another study from the New America Foundation that found that 68 percent of public colleges provide scholarships to students who don't need financial aid.

Rather than help poor students attend college, state schools are using their resources to attract high-achieving, affluent, out-of-state students who can pay more tuition and boost the college's national rankings. By bringing in more wealthy out-of-towners, these public schools are becoming "bastions of privilege," wrote Stephen Burd, a senior policy analyst at New America and the author of the report. And that is often to the detriment of low-income kids and students of color.

A body of research suggests that taking out small loans to pay for college is a manageable expense for graduates, but borrowing more than $10,000 could be detrimental to students of color or students without family resources to buffer against the risk of borrowing, according to the Demos report. High debt load can also lead students to drop out of college, which can make it more difficult to repay the loans.

According to Demos, black and Latino students are dropping out of college with debt at higher rates than white students. At all schools, almost 40 percent of black borrowers drop out, compared to 29 percent of whites. More than two-thirds of black and Latino student borrowers at for-profit, four-year schools drop out. Meanwhile, nearly a third of low-income student borrowers at public four-year schools drop out, a rate 10 percent higher than student borrowers on the whole.