Predatory Inclusion and Education Debt: Rethinking the Racial Wealth Gap

TLDR

Recent studies of racial wealth inequality have focused on asset holdings, while debt patterns remain largely unexplored. The study focuses on educational debt as the exception to general debt trends, arguing that it reflects predatory inclusion that perpetuates racial inequality. The authors analyze 2001‑2013 Survey of Consumer Finances data, showing that most debt inequalities rebounded to pre‑crisis levels, while educational debt growth reflects a predatory inclusion mechanism. Educational debt has risen sharply for blacks relative to whites over the past decade, independent of attainment, while most other debt inequalities returned to pre‑crisis levels after 2007.

Abstract

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 to 2013 data from the Survey of Consumer Finances, we show that after peaking in 2007, racial inequalities for most debt types returned to prefinancial crisis levels. The exception has been educational debt—on which we focus in this article. Our analyses show that educational debt has increased substantially for blacks relative to whites in the past decade. Notably, this unequal growth is not attributable to differences in educational attainment across racial groups. Rather, and as we argue, this trend reflects a process of predatory inclusion—a process wherein 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.