In the United States, federal student loan debt amounts to nearly $2 trillion dollars, burdening more than 15 percent of the country’s population and roughly 24 percent of Black adults. With the rising cost of college tuition, economists are clear—student debt is not an issue to be scrutinized at a later date. It is an economic crisis that needs to be solved now.
New research from the Center for Responsible Lending (CRL) affirms these calls and demonstrates the need for more relief in the immediate future. Data shows that cancelling $10,000 of federal student loan debt— a number thrown out by President Biden on the campaign trail, and a figure he is expected to hold to, would retire just 22 percent of Black student debt and 28 percent of Latino debt. It also reflects similar relief to first generation college students and those already struggling to pay their student debt. More significantly, a cancellation of $50,000 would provide substantial relief for low-wealth and low-income borrowers and eliminate 72 percent of Black and Latino debt. It could also boost the middle class by giving those burdened by debt an opportunity to gain access to credit, buy a home or start a business.
“Once again, Americans who work, pay taxes and tried to do the right thing have been used as cash cows to enrich unaccountable investors and corporate executives,” says Jaylon Herbin, student loan outreach and policy manager at CRL. “The true victims of these abusive loan schemes deserve to have this government-imposed weight removed from their shoulders.”
The idea of student debt cancellation has been an unpopular one among Republicans, making it nearly impossible to pass a measure through Congress to allow for such a prolific relief package. But a national tracking poll from Morning Consult and Politico released last month shows that roughly 64 percent of Americans are in favor of at least some student debt forgiveness, and a percentage were in favor of prioritizing lower-income student loan borrowers.
While conservatives struggle with any number, those on the left suggest the $10,000 figure is simply not big enough. The CRL analysis, compiled using a panel of credit records for more than 360,000 student borrowers and a focus group analysis, as well as new analyses from the 2019 Survey of Consumer Finances, shows that upwards of 87 percent of people delinquent in paying their debt would benefit from a $50,000 cancellation.
Blacks, who have been susceptible to longstanding discrimination, inequitable wages and unfair lending practices could see this considerable cancellation in debt result in sizable financial gain. Students and families of color generally have less personal, family and intergenerational wealth, forcing them to take on more college debt. And economists suggest that by unburdening some Black Americans by this crisis, the United States could simultaneously help to close the racial wealth gap that now persists.
CRL’s research shows that the average student loan debt balance represents 102 percent of the average household income in Black neighborhoods, nearly double that of households in white neighborhoods. And despite diligently making payments for a decade or more, nearly 75 percent of Black borrowers saw their student loan balances grow rather than shrink.
Late last month President Biden said at a press conference that he was “considering dealing with some [student] debt reduction," but made clear that $50,000 was off the table. The President however promised that he would take a hard look at additional debt forgiveness, saying, “I'll have an answer for that in the next couple of weeks."