Resource Category: Borrowing and Debt

The authors find that this overall growth helped close wealth gaps between and within racial groups across the pandemic, and that of all groups, the gap between richer and poorer Black households closed the most. While proportional wealth gaps closed for most groups, most of the increases in real dollar terms still accrued to richer households. Further analyses in this report focus on breaking out households by asset class and value, and the finding that the 60 percent of wealth held by Black and Hispanic homeowners is thanks to the equity they have in their homes.

The authors find that while Asian households have similar wealth to White households, they tend to carry more debt. They also note large differences across different Asian subgroups, with significant wealth differences between, for example, Japanese and Filipino households. Authors also find that certain forms of debt can be a major hindrance towards wealth building, especially for Black Americans.

To address the differential impact on communities of color from debt and provide resources for wealth building, the authors have several recommendations. These include canceling student debt, increasing access to high-quality mortgages for people of color, and reducing medical debt by increasing access to affordable health care. One final recommendation revolves around eliminating most public fines and fees that result in debt. These often fall on populations of color and in certain circumstances can lead to prison time.

The report ends with some suggestions for tackling these disparities. The authors recommend expanded community-based debt-relief and coaching services, as well as the creation of state offices dedicated towards financial education, credit and debt management. Authors also argue that the federal government should affirmatively protect households against wealth-stripping practices and create opportunities for wealth growth such as introducing a savings program to an expanded Earned Income Tax Credit.

Authors propose some solutions to these particularly thorny problems, though they remain relatively high-level. One significant first step that authors emphasize is bringing down the cost of tuition. By going up stream to reduce the baseline cost of college for all students, higher education would become more accessible for everyone and would ultimately be especially helpful in reducing the debt levels of Black students, who currently are more likely to have student debt.