Educational Redlining
Financial firms are using information about where you went to school to decide whether you can get credit and how much it will cost you.
As financial companies use information about families’ behavior when deciding who gets credit and how much it costs, these companies use artificial intelligence to consider information about where you went to school and how much education you have—a practice known as educational redlining. Educational redlining can increase costs or deny credit to people from historically disenfranchised communities and may violate fair lending laws.
What We’re Doing
Protect Borrowers’ research, investigations, and litigation into educational redlining practices by financial firms moves markets, drives congressional oversight, and shapes public understanding of how these firms use families’ data when deciding who gets credit and how much it costs. Highlights from this work include:
Defining Educational Redlining
Protect Borrowers defined the practice of “Educational Redlining”—offering the first warnings about financial firms’ use of information about where you went to school to determine whether you qualify for a mortgage, a car loan, or other kinds of credit. We warned about racial discrimination and algorithmic bias by FinTech firms and banks across the economy, partnered with civil rights groups to hold financial firms accountable, and conducted groundbreaking investigations into companies’ tactics that can raise costs or deny credit to borrowers from historically disenfranchised communities.
Identifying and Monitoring Upstart’s Discrimination Risks
We joined with NAACP Legal Defense Fund to warn the financial technology firm Upstart about potential discrimination risks tied to the firm’s use of education data in its AI model. Upstart agreed to subject its model to independent fair lending testing administered by a third-party monitor, the civil rights firm Relman Colfax—first-of-its-kind oversight that revealed and addressed racial disparities in Upstart’s credit model. This independent monitorship concluded in 2024.
Investigating Stride Funding’s Lending Tactics
Our investigation into lending tactics by Stride Funding uncovered evidence that the firm priced its Income Share Agreements higher for students who attended Historically Black Colleges and Universities (HBCUs). We partnered with NAACP Legal Defense Fund to warn Stride that its tactics may violate federal fair lending laws.
By The Numbers
639 vs 730
Racial disparities in wealth and opportunity is reflected in crediting reporting and scoring. According to the Urban Institute, in 2021, the median Vantage Score for Black consumers was 639, while it was 730 for white consumers.
5x more likely
A borrower in a 90 percent-minority neighborhood is five times more likely to fall behind on their student loans than a borrower in the whitest areas.
2x as likely
For-profit schools are roughly twice as likely to set up in majority Latino or majority Black zip codes as compared to majority white zip codes.