President Joe Biden wants to cancel up to $50,000 in student loan debt for all borrowers and just asked the Department of Education to review his legal authority in using executive action to make this happen. For those who attended public colleges or historically Black colleges and universities (HBCUs) earning less than $125,000 a year this will be a huge win, as the burden of student loan debt is worsening wealth inequality and continues the debt disparity among Black college students. It’s no secret that the cost of college is climbing faster than American wages and the inflation rate, 8x faster, to be exact, so getting rid of this debt could finally move the needle on closing the racial wealth gap.
The Breakdown You Need To Know:
Biden’s plan to cancel student loans is part of a broader strategy to make higher education more affordable and less financially burdensome, according to CultureBanx. Education is one area where Black Americans are hurting the most due to institutionalized racism-especially with student loans. Young Black adults take on 85% more education debt than their white counterparts, and that disparity compounds by 7% each year after the borrowers leave school, according to a recent study in the Sociology of Race and Ethnicity journal.
Students of color typically rack up hundreds of thousands of dollars in student loan debt, meaning they are unable to focus on other financial goals like buying a home, paying off credit card debt, and saving for retirement. Eliminating this would narrow the racial wealth gap for young families, with 86.6% of Black students taking out federal loans to attend four-year colleges, compared to just 59.9% of white students.
What’s more, the amount of loans that are 90 or more days delinquent has not changed much since 2012, proving that the financial burden is still high, just like the unemployment rate, now at 10.3% for African Americans. Specifically, HBCU students are more likely to default over a 12-year period, than African Americans attending other four-year colleges and universities, according to the Wall Street Journal.
Stifling Student Loans:
Since students of color have to focus on paying off their student debts for longer, this means they are unable to focus on other financial goals like buying a home, paying off credit card debt, and saving for retirement. Studies show that white men have paid off 44% of their student loans twelve years out of college, while Black women owe 13% more.
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For the nation’s 45 million borrowers that collectively owe $1.7 trillion in federal student loan debt, they have found themselves in a comfortable limbo for nearly a year. The majority of student loan borrowers, roughly 67%, who have more than $10,000 in debt they need help now. Advocates say forgiving student debt is a crucial part of any meaningful response to the coronavirus pandemic, pointing out that borrowers were already struggling prior to the crisis. More than 1 in 4 student loan borrowers were in delinquency or default.
A legal review is non-binding, as it merely answers the question of whether Biden has the authority for executive action, not whether he should use it or how much debt should be forgiven. Democrats do have enough votes to pass debt relief legislation through Congress, which might explain why the progressive wing of the party has been pressuring Biden to take the executive action route. Unfortunately, there are no guarantees that Biden or Congress will cancel student loans at this point, but the upside to closing the racial wealth gap is tremendous if they do.