Report: Borrowing, Default Vary by Zip Code

November 14, 2019

In areas with higher populations of underrepresented minorities, students borrow to pay for college more often, and also default on student loans more often, according to a study released Wednesday by the Federal Reserve Bank of New York.

The report examined the zip codes of borrowers, grouping them by the race of the majority of residents within each zip code, and found "significant gaps."

Borrowing rates are somewhat higher in areas with a majority of black residents, at 23 percent, compared to 17 percent in Hispanic-majority zip codes and 14 percent in white-majority zip codes. The balances are also higher in black-majority areas.

While the average balances for borrowers in white- and black-majority zip codes were much closer in the past, balances of borrowers in black-majority zip codes started to grow at a faster rate in 2010, the report says. Now, the average in those areas is $37,000, which the report says is concerning, because the average income most recently reported in those areas was $38,000.

Similarly, default rates are much higher in Hispanic- and black-majority zip codes, at about 13 percent and 17.7 percent, respectively. The default rate in white-majority areas is 9 percent.

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