A new report says canceling student loan debt will dramatically improve the lives of black student debtors and close a widening racial wealth gap.
The report from the Center for Law and Social Policy (CLASP) and the National Center for Consumer Law (NCLC) comes on the heels of President Joe Biden’s contemplation of eliminating $10,000 per borrower in student loans, in an effort to tackle high debt levels.
“The student debt crisis is particularly severe for black borrowers,” the report’s authors said.
They added that black students are more likely to take out student loans than white students, and they also have the highest levels of student debt across all demographics. They also write that they earn less in the labor market than their white counterparts, “making it difficult for these borrowers to escape the burden of student loan debt.”
“The education system has not worked as a great equalizer”
“The higher education system has not acted as a significant balancing factor in providing low-income and low-income populations with a pathway for social and economic mobility,” the report says. Instead, like all other major American institutions, the
The higher education system has perpetuated and exacerbated existing inequalities, particularly with regard to race.
Both groups pushed Biden to cancel student loan debt on a large scale for all borrowers, who do not have a maximum income, to extend the suspension period, as well as reforms in consumer protection and repayment space.
Student loan debt cancellation a ‘good policy’
There is a 6-to-1 gap in per capita wealth between whites and blacks, according to a separate paper published earlier this week by economists at Boone University and Princeton University. “It is also one of the most urgent,” conclude the authors. Using data from the US Census Bureau and early state tax records, they find that the racial wealth gap has widened over the past 160 years.
Americans’ outstanding student loan debt currently stood at $1.59 trillion in the first quarter of 2022, according to the Federal Reserve Board of New York.
The White House plans to waive $10,000 in federal student loans to each borrower, but it will limit the tolerance for those who took less than $150,000 in the previous year or for spouses who filed joint applications, to $300,000 in the previous year, according to the Washington Post.
A lawmaker who played a key role in pushing the president to consider debt cancellation said that debt cancellation solves some of the long-standing problems black borrowers face with education.
“Democrats win when we deliver results, and we need to do it in ways that are impactful, tangible and transformative, such as canceling student debt,” Congresswoman Ayanna Pressley (D) formerly told Yahoo Finance. “It’s good policy, and it’s good policy too.”
Federal student loan payments are currently suspended until August 31, 2022.
According to the report, black borrowers are not only more likely to default on student loans, they are also more likely to be late and default on their loans.
Black parents also incur a high cost, having taken out Parent PLUS loans.
According to a report by the Public Policy Foundation of Texas, the top school that left students with the highest average PLUS loan balance was a historically black college – Spelman College. The Wall Street Journal reported similar findings.
“Spelman College is painfully aware that our families are burdened with debt,” Marie Schmidt-Campbell, president of Spelman College, told CNET. To help reduce this burden, Spelman’s top priority was to collect more scholarships and improve affordability. We’ve made great progress and intend to keep the support of our students as our top priority.
Not everyone agrees that widespread abolition would close the racial wealth gap.
Adam Looney, a senior fellow at the Brookings Institution, wrote in a blog post in January that broad tolerance is “a costly and ineffective way of reducing economic gaps based on race or socioeconomic status.”
“The persistence of the wealth gap between blacks and whites is worrying and worth addressing,” Looney added. “There are better, more efficient and progressive ways to bridge the racial wealth gaps,” he added.
“Hasty political gambles like blanket student loan forgiveness are not worth undermining our ability to provide educational opportunities to those who would not otherwise have them,” Virginia Fox, the Republican leader for CBS, told CNET. Carolina.
“While the president satisfies the demands of radical progressives, he is alienating two-thirds of Americans without a degree by offering this massive transfer of wealth,” she added.
“If his goal is to get low-income Americans to support outstanding college graduates and the upper class, then President Biden will achieve that goal if he continues with this disastrous policy.”