Supporters say canceling student loans could narrow racial wealth gap - Reuters News in France and abroad

Supporters say canceling student loans could narrow racial wealth gap – Reuters News in France and abroad

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A college education was supposed to help close the wealth gap for black Americans.

However, researchers have found that the opposite is true, thanks to student loan debt.

The average wealth of black families is less than 15% of that of white families, according to the 2019 Federal Reserve’s Survey of Consumer Finance. Research shows that this gap is most pronounced among student borrowers.

Black borrowers’ wealth accounts for about 5% of white borrowers’ wealth, according to an article by Raphael Sharon Chener, Louise Semester, Thomas M. Shapiro, and Laura Sullivan titled “A Pathway to Racial Justice: Designs for Social Security Policies.” Student Debt Cancellation. »

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Because education is financed through debt, our education does not have the same effect,” said Semester, an assistant professor of sociology, criminology and African American studies at the University of Iowa.

“It does not lead to wealth for black families, and in fact, it actually exacerbates wealth inequality.”

Student debt is really a debt trap for black borrowers. »

Higher education is increasingly expensive. Because black families tend to have less wealth, many of them have to borrow money to get a degree — and they borrow more than their white counterparts, explains Charron-Chenier, a sociologist and assistant professor at Arizona State University. . .

About 24% of black adults say they have federal student loan debt, compared to 14% of white adults, according to the CNBC + Acorn’s Invest in You Student Loan Survey conducted by Momentive.

According to a report by the Brookings Institution, black college graduates owe an average of $7,400 more than their white peers by the time they graduate. Four years after graduation, they owe an average of $52,726, compared to $28,006 for the average white college graduate, according to the report, which included non-borrowers on average.

Meanwhile, another analysis found that 66% of black borrowers owe more than they originally borrowed 12 years after starting college.

“This is because the interest accruing on their loans is more than the payments they can afford on their loans,” said Charlie Eaton, associate professor of sociology at the University of California, Merced, who participated in the survey.

So student debt is really a debt trap for black borrowers. »

The effect of student loan cancellation on the wealth gap

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Advocates say canceling student debt could impact the racial wealth gap, although it’s not the only solution to a complex problem. Instead, they said, it’s the first step to addressing it.

Canceling $50,000 of student debt for households with less than $100,000 in income would increase black borrowers’ wealth to 33% of white borrowers’ wealth, up from 5% previously, according to “A Pathway to Racial Equity.” According to the report, raising it to $75,000 in rebate would raise it to 42%.

“While the amount itself doesn’t have a huge immediate impact on the racial wealth gap, it can help people at a really critical time,” said Sharon Chener.

During the post-college period, young people find work and possibly buy a house. However, student debt prevents many people from owning a home.

Student debt is really a debt trap for black borrowers.

Charlie Eaton

Assistant Professor at University of California, Merced

Sharon Chener noted that “the racial wealth gap is not driven exclusively, but very strongly, by people’s ability to simply buy a home and retain its value.”

Giving withdrawn student loans is not a panacea for the wealth gap between generations, said Nicole Smith, a research professor and chief economist at Georgetown University’s Center for Education and the Workforce.

“The real racial wealth gap between the generations that we see in American society has taken generations to form, and it will take generations to close it as well,” she said.

“Even if we magically erased this burden from every person of color, they would still sway far behind the rest of society because it is just a stark difference that has been exacerbated by structural inequality, by racial inequality, by racial injustice, for decades.”

How much debt should be cancelled?

US President Joe Biden delivers remarks during the 29th quadrennial constitutional convention of the AFL-CIO at the Pennsylvania Convention Center in Philadelphia, US, June 14, 2022.

Evelyn Hochstein | Reuters

President Joe Biden supported the clearing of $10,000 from borrowers’ accounts. However, a decision on the matter is not expected before the end of the summer, according to the Wall Street Journal. mentioned.

For the NAACP, $10,000 is not enough.

“He’s throwing a bucket of ice at a wildfire,” Derek Johnson, NAACP President and CEO, told CNBC recently. “Cancellation must be at least $50,000.”

Some Democrats, including Senator Chuck Schumer of New York and Senator Elizabeth Warren of Massachusetts, are calling for a pardon of at least $50,000.

Opponents of student loan cancellation argue that debt forgiveness would add up to $1.7 trillion to the national debt, fueling inflation. Several Republican senators introduced legislation in May to prohibit the Biden administration from writing off student loan debt.

“This decision would not only be unfair to those who have already paid off their loans or decided to pursue alternative educational paths, but it would be very inflationary in an era of historic inflation,” Senator Mitt Romney of Utah said. in the current situation.

Les opposants soutiennent égallement que le pardon aggraverait les inégalités, soulignant un autre Rapport de la Brookings Institution cela montre qu’un tiers de toutes les dettes étudiantes sont dues par les 20 % les % 20 plus les sons et % dues et the poorest.

Adam Looney of the Brookings Institution writes that the best way to close racial and socioeconomic wealth gaps includes college grants and loans, income-based repayment plans, and targeted borrower assistance.

While some advocates argue that public relief is preferable, Smith of Georgetown University agrees that there must be some criteria, perhaps around income and occupation.

“It has to be calculated and decisive,” she said.

Once the student debt problem is resolved, UCLA’s Eaton said, it will allow the focus on college that is free and affordable — so the course doesn’t last.

“Canceling student debt will alert Congress that it is time to create debt-free college programs so that students, including black students, do not have to borrow for college,” he said.

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