(Reuters) - Student loan borrowers from mostly black neighborhoods are almost twice as likely to default on their debt as borrowers from neighborhoods that are mostly white, according to research released Wednesday by the Federal Reserve Bank of New York.

FILE PHOTO: Students walk on campus at the University of Michigan in Ann Arbor, Michigan, U.S., September 20, 2018. REUTERS/Rebecca Cook

Borrowers from black neighborhoods also tend to carry larger debt loads, the data showed.

Fed researchers found that people in black-majority neighborhoods were slightly more likely to borrow for college, with 23% of residents carrying student loans, compared to 17% of people in Hispanic-majority neighborhoods and 14% in white-majority zip codes.

“The federal student loan program aims to ‘make college education possible for every dedicated mind,’” the researchers wrote in a blog post published Wednesday. “But high delinquency rates suggest that the high borrowing rates may not be paying off immediately for all borrowers, particularly if their income remains insufficient to maintain current status on their debt service payments.”

Higher borrowing rates in black neighborhoods could be explained by differences in income, with people from lower-income households being more likely to need loans to pay for school, the researchers wrote.

Still, the differences in borrowing rates were not large enough to fully explain the disparities in default rates and student loan balances.

Some 17.7% of borrowers in majority-black neighborhoods defaulted on their student loans, a proportion roughly twice as high as the 9% of borrowers from mostly white neighborhoods who defaulted on loans.

The average student loan balance in black-majority areas was more than $37,000 at the end of September, about equal to the average income of $38,000 reported on tax returns in those areas in 2016, the most recent data available. That suggests those borrowers may have a high debt-to-income ratio, a measure that lenders often look at when determining credit worthiness.

WEALTH DISPARITIES

Other studies have found that the higher rates of borrowing among African American and Hispanic students are linked to longstanding racial disparities in income and wealth.

Students of color often need to borrow more money to pay for college because their families have less wealth to draw on to help cover those costs, according to a report released in September by the Center for Responsible Lending.

Those higher debt loads help to perpetuate the racial wealth gap. For instance, black and Hispanic workers tend to be paid less than their white peers. Those smaller paychecks, combined with the larger debt loads, make it harder for students of color to buy homes or make other investments that could help them accumulate wealth.

“How do we ever get out of this cycle?” Ashley Harrington, senior policy counsel for the Center for Responsible Lending, told Reuters in an interview on Wednesday. “In order to get more opportunity, you need to go to college but you need more debt to make that happen. At the same time, incomes have not kept up”

Students of color are also disproportionately targeted by for-profit schools, which have lower graduation rates and are typically more expensive. That often leaves students with larger debt loads and none of the benefits - including a degree or higher wages - that would help them pay off those loans, Harrington said.

The New York Fed research was released alongside the bank’s quarterly report on U.S. household debt, which showed overall debt levels among American households rose 0.7% in the third quarter to a record $13.95 trillion.

The central bank had previously looked at student loan outcomes according to income and found that people with lower and higher incomes were almost equally likely to have student loans and had similar loan balances. Lower income borrowers, however, had higher delinquency rates.

To incorporate race, the researchers used Census data to group zip codes by the race that was most prevalent in that area.