Southeast Bank To Pay $1.5M To Settle Discrimination Lawsuit With Black And Native American Graduates
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Black and American Indian/Alaska Native (AI/AN) graduates have secured a huge settlement against Tennessee’s SouthEast Bank in a case involving allegations of racial discrimination. On Jan. 19, the U.S. Department of Justice announced that the bank would pay $1.5 million to resolve federal claims accusing the bank of unfairly blocking Black and Indigenous graduates from refinancing their student loans.
The settlement addresses accusations that SouthEast Bank engaged in discriminatory lending practices by systematically discouraging and denying refinancing applications from Black and AI/AN graduates. According to the complaint, filed on Jan. 18, the bank’s refinancing criteria, in effect from December 2015 to April 2021, resulted in automatic denials for graduates from schools with default rates above thresholds set by the bank.
The lawsuit alleged that the financial institution’s policy disproportionately impacted Black and AI/AN graduates. For instance, Black bachelor’s degree holders were up to 4.3 times more likely to be excluded from the refinancing program than their non-Black peers. Similarly, AI/AN graduates were up to three times more likely to face exclusion. The complaint also claimed that SouthEast Bank’s policies disproportionately affected graduates from predominantly Black institutions, including Historically Black Colleges and Universities (HBCUs). While up to 84.4% of graduates from majority-Black schools were excluded, only 21.1% of graduates from predominantly non-Black institutions faced similar exclusions.
On average, Black graduates carry significantly more student loan debt than their peers. According to the Education Data Initiative, in 2024, Black and African American college graduates owed about $25,000 more in student loan debt than their native counterparts. AI/AN students, on the other hand, had the lowest average loan debt, at $10, 590.
Assistant Attorney General Kristen Clarke of the Justice Department’s Civil Rights Division said the whopping settlement marks a significant step toward addressing racial disparities in student loan refinancing and ensuring more equitable access to financial relief for graduates.
“Everyone in our country should have a fair chance and equal opportunity to refinance a school loan. By rejecting graduates based on where they obtained their degree, SouthEast Bank’s policy denied and discouraged Black, American Indian and Alaska Native graduates seeking to refinance student loans for reasons that were wholly unrelated to their personal merit or ability to repay their loans,” Assistant Attorney General Kristen Clarke added.
“This is a reminder of how historic inequities in lending and refinance opportunities for Black and American Indian/Alaska Native students persist today, and why combating these inequities is an essential part of the Justice Department’s work.”
In addition to the $1.5 million settlement, SouthEast Bank is required to compensate applicants who were denied the opportunity to refinance their student loans due to the discriminatory policy. The bank must also expand access to student loan refinancing for qualified graduates from schools that were previously excluded under the policy. Furthermore, SouthEast Bank is obligated to provide consumer financial education to students and graduates of those schools that were once excluded.
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