Bay Area’s Student Loan Debt Up Nearly 250 Percent

The number of borrowers is lower than the nationwide average, but a new report says that figure masks racial and class disparities.

Discussions around Sen. Elizabeth Warren’s student-debt forgiveness and free college proposal couldn’t come at a better time. Within the past 15 years, the Bay Area’s total student-loan debt increased 243 percent — a figure that affects Black and Latinx residents the most.

The city’s Office of Financial Empowerment and the Federal Reserve Bank of San Francisco released a report Tuesday that cautions that the looming debt crisis must be addressed “urgently.” The study found that 12 percent of all adults in the nine-county region — nearly twice as many than in 2003 — owe a collective $26.6 billion in student loans. (San Francisco’s stands slightly higher, at 14 percent.)

Although that’s lower than the statewide average (13.9 percent) and the national average (17.9 percent), researchers warn that these numbers can mask deep disparities exist in low-income areas and among communities of color.

The more troubling figure is the percentage of borrowers who are in arrears. Black and Latinx neighborhoods like Bayview-Hunters Point, Treasure Island, and East Oakland had delinquency rates between 23 and 32 percent, which means they are more than 90 days past due. Regionwide, 11.2 percent of student loan borrowers are delinquent, up from 7.4 percent in 2003. And just 37.1 percent of low-income borrowers are making payments on time compared to 53.8 percent of the Bay Area wealthy.

“Student-loan debt is accelerating the racial wealth gap in San Francisco, across the Bay Area and nationally,” San Francisco Treasurer José Cisneros said. “These findings are stark, upsetting, and impossible to ignore.”

What makes the gap along class lines so much starker is that almost half of borrowers owe less than $15,000 and about one in five owe less than $5,000. The median balance of debt increased since 2003 as well, to a median of $13,685 and an average of $17,489.

If Warren has her way, this abysmal number-crunching could get sunnier. The 2020 presidential candidate, with a yearslong penchant for talking about the need for affordable higher education, released a sweeping policy proposal on Monday that would eradicate student-loan debt for millions of Americans and make two- and four-year public colleges free. Borrowers in households earning less than $100,000 would have up to $50,000 of their student loans forgiven. Although the plan would cost roughly $1.25 trillion over a decade, a two-percent tax on 75,000 families with $50 million or more to their name would generate the needed revenue.

While Warren has a federal fix, San Francisco may have a local one. The city, spurred by activists and now backed by supervisors, is pursuing the establishment of a public bank that would take its roughly $11 billion budget out of the hands of big banks. A big sticking point for those pushing for such an institution is the ability to issue low-interest loans for students, small businesses, affordable housing, and more.

The report, though, offers its own recommendations: improve education for prospective borrowers, build stronger support systems for low-income high school students, conduct outreach to distressed borrowers, and integrate financial coaching into city services. It also suggests that policymakers bring stronger state oversight and enforcement to prevent predatory lending while better financing higher education.

But even with a free City College program, San Francisco’s most vulnerable inhabitants are struggling to pay off the small loans they took out with the promise they could one day compete for a slice of the region’s wealth.

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