A report by the Student Borrower Protection Center states that graduates of HBCUs and Hispanic-serving institutions are paying more to loan lenders than graduates from predominately white institutions (PWI).
Researchers found that "hypothetical graduates of historically black colleges and universities, or HBCUs, and Hispanic-serving institutions, or HSIs, like Howard University and New Mexico State University, were offered loans that cost thousands of dollars more than those who attended nonminority serving institutions, such as New York University," NBC News reported.
Researchers discovered potential borrowers with almost the same work status were offered different loan packages from Wells Fargo, depending on the type of institutions they graduated from.
"In one case study, a potential borrower who worked as a financial analyst making $50,000 a year paid $1,134 more in loans if he or she had attended Los Angeles ORT College, a community college, versus Chapman University, a private four-year university," NBC reported.
The members of the Senate Committee on Banking, Housing, and Urban Affairs have written a letter to Upstart, a lending agency, for possibly charging Black students more for attending an HBCU rather than a PWI despite students at those institutions being similarly situated.
Among the members are Sens. Sherrod Brown, Elizabeth Warren, Bob Menendez, Cory Booker and Kamala Harris, who are standing against companies like Upstart and other lenders and service providers that have been accused of overcharging Black students colleges compared to their white counterparts.
The senators are pressuring Upstart to disclose how the lender considers the creditworthiness of HBCU students by February 27. The lender said in its defense that it does not consider creditworthiness based on a specific school but rather, "groups of schools that have similar economic outcomes and educational characteristics," according to the letter.
"The report found that a graduate of Howard University, an HBCU, would be charged $3,499 more over the life of the five-year loan than a similarly situated graduate of New York University," the senators wrote in a letter sent to Upstart. "Based on the racial demographics at these schools, these findings raise serious concerns that Upstart's use of educational data may have a disparate impact on borrowers of color."
In the letter, the senators invoked The Equal Credit Opportunity Act, which prohibits discrimination in any aspect of a credit transaction. Under the statute, lenders can be liable if they mistreat applicants based on the color of their skin or their nationality. Lenders can also be held accountable if their practices have a disproportionate impact on a protected class.