Although African-American households hold lower levels of debt on average ($30,800) than white households ($73,800), more than a quarter of African-American households report struggling with debt payment, compared with 15 percent of white households, a report from and the finds. Based on a literature review and interviews, the report, (44 pages, PDF), found that as a result of the legacy of discrimination that has left them with few assets with which to leverage debt, African Americans are turning to costly forms of debt that they struggle to pay back, which in turns lowers their credit score: only 40 percent of African-American households report having good or very good credit, compared with 65 percent of white households. According to the report, many African Americans find it difficult to manage debt due to knowledge barriers such as lack of information; behavioral barriers such as deciding to skip or make only a partial payment because it seems to be the best option at the time; and structural barriers such as being stuck in low-wage jobs or incurring unexpected expenses and having no financial cushion. Current debt management and relief services fall short, the report concludes, and need to better help clients overcome feelings of being overwhelmed, offer immediate and tangible relief, help resolve concerns about legitimacy — given that African Americans are disproportionately victims of debt-related fraud — and explore best practices from other types of racial equity work.
(Photo credit: Fotis Bobolas)