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Black and Latino Student Loan Borrowers Face Roadblock to Paycheck Protection Program Relief

Wednesday, February 10, 2021
Julia Barnard
Ashley Harrington

WASHINGTON, D.C. – Today, the Center for Responsible Lending (CRL) released an analysis that connects the dots between student loan default and delinquency rates among Black and Latino business owners and barriers to accessing Paycheck Protection Program (PPP) loans intended to keep small businesses alive during the pandemic.

Over 800,000 self-employed people were behind on their student debt before the pandemic and may be ineligible or have the perception that they are ineligible for the relief they need to survive in a faltering economy. Because of structural inequities including racial wealth disparities, ongoing discrimination in the labor market, and inadequate funding for colleges that serve higher numbers of students of color well, Black borrowers and other borrowers of color carry more student debt and they have more difficulty paying it off.

"Given the severity of the student debt crisis and the number of self-employed people who are behind on their student loan payments, the restriction on Paycheck Protection Program funds for people with student debt default or delinquency has a major impact,” said CRL Researcher Julia Barnard. “While nearly 40% of student borrowers who started college in 2003 will likely default on their loans by 2023, the number is even higher for borrowers of color. Our analysis finds that 500,000 self-employed student loan borrowers of color may have been unable obtain the PPP relief funds they need to carry them through the pandemic.”

The PPP had structural problems from the start that advantaged well-resourced, well-connected businesses over the smallest in accessing the funds, particularly businesses owned by people of color who have never had equitable access to credit and capital. These problems included many lenders prioritizing these larger businesses because of the fee structure and reliance on prior commercial banking relationships, the inability of lenders who do serve communities of color well to participate early on, and others.

“Black and Latino-owned businesses are vital to their communities. This is only the latest example of structural barriers and inequities in one area carrying over to another and compounding the harm to communities of color,” said CRL Director of Federal Advocacy Ashley Harrington. "The Small Business Administration should suspend any restrictions on relief funds based on student debt. We must remove all barriers in relief programs that disadvantage people of color and exacerbate racial wealth disparities."


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