ZIP Codes and Equity Gaps

The people of the neighborhoods that are mostly Black and Hispanics are less likely to attend college, and when they do, borrow more and default on student loans more, according to a report from the Bank of the Federal Reserve New York.

These findings, among others, are part of the series "Introduction to the heterogeneity of the series III: Credit Markets results". which explores the racial differences in outcomes of education, housing and health

"These are problems social critics who are always above COVID-19, but it is clear that the implications of each have been more marked by the coronavirus, "said Andrew Haughwout, vice president of the New York Fed, during a presentation of the reports.

The researchers analyzed the differences in rates of college attendance, student debt and failures racially segregated neighborhoods, and how tuition subsidies affect other debt and consumption habits. in the first issue, the researchers used from the New York Fed Cr Consumer edit Panel and the National Research Center Information Center Student and data from the Bureau of the Census of the United States zip codes to classify as mostly white, Black or Hispanic.

"We can see that there are considerable differences ... when we are looking at the racial composition of neighborhoods," said Rajashri Chakrabarti, an economist at the New York Fed.

The analysis found that people of mostly white postal codes attending college at the highest rates, followed by the black majority. The majority of white postcodes attended four-year colleges at higher rates compared to the other groups. People in most Hispanic zip codes had the highest rates of attendance at two-year colleges.

In the same way, for student loans, people mostly black neighborhoods of attending college are more likely to take on student loans than the majority white or Hispanic areas. The majority of the black areas were 9 percent more likely to have a student loan 30 years of age than other groups.

The most white or Hispanic areas had the same propensity to have debt of the student, and those who attended four-year colleges carry balances similar debt at 30 years, according to the report. Those in the majority Hispanic neighborhoods universities attended two years on loan at slightly lower rates than their white counterparts, with balances below 30 years.

The major black borrowers in areas held debt balances higher than the other groups. In particular, those who attended two-year colleges had balances 45 percent higher than 30 years than their Hispanic counterparts, compared to 23 percent higher balances for those attending four-year colleges.

A watching default rates of student loans, researchers found that borrowers who attended two-year colleges in default almost 50 percent more than those attending four-year colleges in all racial neighborhoods, aged 30. Although those who attend two-year colleges are less likely to loan "debt to take more risks," said the report. This is probably due to differences in employment outcomes between four years and two years schools, Chakrabarti said.

In general, borrowers in most or postcodes Black Hispanics are more likely to stop paying this debt by age 30. borrowers majority black areas attending two-year colleges in arrears on 1 9 times the rate of the white areas of the majority. Those in areas mostly Hispanic breached 1.7 times more than their white counterparts

"These disparities in patterns of debt and default are Stark and it is important to better understand the underlying reasons these differences -. a challenge that will take in future work, "the report said.

The second analysis related to education compared to the results of debt and consumption of students who were eligible for tuition grants because of their age and origin with those who were not eligible for help because their home state did not implement such a program while attending college.

for students who were eligible for aid, the researchers found an increase in spending in the short term captured by debt credit card, although this effect disappears after students beyond the age of 20 years. This implies that students substituted one form of debt (student loans) for another (credit cards), Chakrabarti said. This pattern is more pronounced for students of majority Black or Hispanic zip codes.

There was also an effect on late payments of credit cards. A student cohort of eligible aid was 1.8 percentage points more likely to have been 25 years at the least 90 days delinquent on their credit cards a student who was not eligible for aid.

Students eligible for the aid also of a percentage point were more likely to have bought a car with an auto loan, researchers found. This is especially important for students of majority Black or low-income areas.

In General, the researchers found that levels increases eligibility for debt help students in their 20s, but subsequently reduced in life. Total debt burdens for those who are eligible for aid, including students, mortgages, credit cards and other debts, decrease in their late 20.

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