Analyses of the recent surge in racial wealth inequality have tended to focus on changes in asset holdings. Debt patterns, by contrast, have remained relatively unexplored. Using 2001-2013 data from the Survey of Consumer Finances (SCF), we show that after peaking in 2007, debt levels for most debt types had returned to pre-financial crisis levels for blacks and whites by 2013. The primary exception to this is education debt, on which this paper focuses. We show that educational debt has increased substantially for blacks relative to whites in the past decade. We also show that this increase in debt is not attributable to differences in educational attainment across racial groups. These trends, we argue, reflect a process of predatory inclusion, where lenders and financial actors offer needed services to black households, but on exploitative terms that limit or eliminate their long-term benefits. Predatory inclusion, we propose, is one of the mechanisms behind the persistence of racial inequality in contemporary markets.
Exploring the Racial Wealth Gap Using the Survey of Consumer Finances