Student lending, Wall Street's next bubble, will disproportionately affect black people

"... the sheer number of students with outstanding loans has credit-rating firm Moody's Analytics worried. As of March 30, outstanding student loans totaled about $805 billion, according to the U.S. Department of Education, which administers the loans. Rising tuition costs, a soft job market and troublingly low graduation rates at many schools cast doubt on whether a growing number of people will be able to pay those loans back."

"In a July report, Moody's opined that students' inability to pay back their loans could cause the next economic crisis in the U.S. According to the Education Department, default rates are on the rise nationwide, standing at 7 percent as of September 2010 (the latest figure available), up from 6.7 percent the year before. Moody's expressed special concern about students at for-profit proprietary schools, which include many trade and online universities, and where graduation rates are typically lower than those of traditional colleges and the loan-default rate is higher. Minorities make up a majority -- about 54 percent -- of students enrolled at these schools..."

"For proprietary schools, the student-loan default rate as of September 2010 was 11.6 percent, up from 11 percent the year before. Low graduation rates, high tuition costs and training in fields that are in lower demand are among the reasons people attending these schools can't meet their obligations, according to Moody's. With unemployment at a staggering rate of 15.9 percent for African Americans (the national unemployment rate hovers at around 9 percent), the bursting of a bubble in student lending could be especially hard on the black community."

"A 2010 study by the College Board Advocacy & Policy Center (pdf) found that student-loan debt levels of $30,500 or higher were more common among black bachelor's degree recipients (27 percent) than among their white (16 percent), Latino (14 percent) or Asian (9 percent) counterparts. Plus, "More black students have student loans and have higher unemployment rates, so the debt level is more consequential," said political economist Dr. Jessica Gordon Nembhard in an email. Nembhard is an associate professor of community justice and social economic development in the department of African-American studies at John Jay College in New York City. "With the increase in the economic downturn, black unemployment levels will stay high or get worse."