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Journal of Hispanic Policy

Topic / Education, Training and Labor

Latinos’ Student Loan Debt and the Implications: Delaying the American Dream

Today, more Latinos are attending college than ever before. During the 2012 academic year, there were 2.4 million Latinos enrolled in college, comprising 19% of the total college-going population. Despite this surge in college enrollment, only 9% of the total Latino population between the ages of 25 and 29 holds a bachelor’s degree. This paints a bleak picture for Latinos as they strive for the American Dream, as enrolling in college without attaining a degree will not necessarily facilitate upward socioeconomic mobility. Further, Latino college students are also grappling with this generation’s greatest financial burden—student loan debt.

Although borrowing is on the rise for all undergraduates, Latinos are accumulating some of the highest student debt totals. In 2012, 67% of Latino college graduates completed their degrees with some form of student loan debt. On average, Latino undergraduates acquire $49,700 in debt, which is slightly less than their white counterparts ($54,000) but above all other minority groups. The majority of this debt is nonfederal, which carries a variable, and likely much higher, interest rate than federal loans. These loans also tend to have a longer repayment period than federally backed loans. Essentially, Latinos are taking out riskier loans at a higher interest rate than their counterparts, creating scenarios where they will be paying back more money over a longer period of time. This leads to adverse effects on young Latinos’ ability to achieve the symbols of the American dream, such as purchasing a home, starting a family, or opening a small business. Policymakers, university administrators, and advocates all have a role to play in ensuring that Latinos graduate from college with as little debt as possible.

Institutional Shifts Toward Merit-Based Aid

Colleges and universities should examine how institutional aid dollars are allocated in order to ensure that Latinos and other low-income students receive adequate financial support. In recent years, institutions of higher education have shifted their funding formulas from need-based aid, where financial aid is awarded based on student economic need (as determined by the FAFSA) to merit-based aid, where financial aid is awarded based on merit (as defined by academic performance, or other criteria like leadership or community service). This shift has negatively impacted Latinos as they are less likely than their white counterparts to receive merit-based aid. With less money funneled into need-based grants and scholarships, Latinos are left to pay a larger portion of tuition out-of-pocket, and thus turn to federal and private loans to finance their education.

Supporting Federal Work-Study

Higher education institutions and the federal government should provide additional funding for federal work-study in order to provide additional financing options for Latino students. For decades the Pell Grant has served as the cornerstone of federal student aid. The Obama administration has worked tirelessly to ensure that more money is available through Pell, however the grant has failed to keep pace with the increasing cost of college. Programs like federal work-study provide students with a source of income, while enabling them to obtain valuable work experience while simultaneously engaging with faculty, administrators, and the larger campus and surrounding communities. Universities can support this effort by providing matching funds to expand federal work-study opportunities. The benefits are indeed plentiful as students that participate in work-study are also more likely to graduate and be employed after completing their degree.


While improving financing options will make college more affordable for Latinos, additional investments in mentorship programs will help ensure that students reach graduation. The fact that only 9% of the total Latino population between the ages of 25 and 29 holds a bachelor’s degree is unacceptable. As a nation, we need to do better to ensure that our largest growing population is on the path to prosperity. Mentorship from Latino college graduates can play a key role in making this goal a reality. Latino students often begin college with less information and less resources than their counterparts-which can lead them to take on expensive and risky loans. Mentors can help fill this information gap and help students choose the least expensive options for financing their degree.

Crushing student loan debt totals are slowly delaying the American dream for Latinos. Despite growing public skepticism over the value of college, postsecondary degree attainment is still the clearest path to achieving this dream. This ultimate goal encompasses the same elements as it did for Latinos from previous generations: a good job, a home and a family. We all have a vested interest and should play an active role in ensuring that younger generations of Latinos are able to achieve those goals. If we do not commit to this, what will our nation look like in 2020, or in 2050? Not only will we not be able to compete globally, but we will not be able to sustain our own economy. What will the American Dream look like then?


All views expressed herein are those of the author and do not represent the views of his/her employer, or of Harvard University, the John F. Kennedy School of Government at Harvard University, the editorial staff of the Harvard Journal of Hispanic Policy, or the Executive Advisory Board of the Harvard Journal of Hispanic Policy.