By CultureBanx Team
- The Biden administration is leaning toward forgiving $10K in student loans per borrower
- Canceling up to $50,000 of student loan debt per borrower would immediately increase the wealth of Black Americans by 40%
The Biden administration is leaning toward forgiving $10,000 in student loans per borrower, according to reports. 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 debt will start to narrow the racial wealth gap for young families, with 86.6% of Black students taking out federal loans to attend four-year colleges.
Why This Matters: It is definitely possible to initiate a positive long-term impact on racial wealth gap by tackling the inequities that hang on to the students’ college debt. The Roosevelt Institute brief shows that canceling up to $50,000 of student loan debt per borrower would immediately increase the wealth of Black Americans by 40%. More than 40 million Americans are in debt for their education, and about 25% of those borrowers are in delinquency or default.
“The average Black borrower has $53,000 in student loan debt four years after graduation, nearly twice the amount as their white counterparts,” said NAACP President Derrick Johnson. Canceling $10,000 per borrower would cost around $321 billion and completely forgive the loans of about one-third of student loan borrowers.
Student debt cancellation is not regressive, in fact, it’s progressive and needs to happen. Canceling student debt would make the income and wealth distributions more egalitarian and nearly eliminate negative net worth households from the wealth distribution. While this isn’t wide-scale student loan cancellation in the traditional sense, this will save student loan borrowers substantial money for their student loans, as Zack Friedman of Forbes writes.
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. A large number of Black borrowers are not witnessing “good debt”, according to the Jim Crow Debt study by The Education Trust
What’s Next: Some Democrats and activists have insisted that President Joe Biden needs to cancel at least $50,000 per borrower to make a meaningful impact on the country’s $1.7 trillion outstanding student loan balance. At this point it’s unclear whether the administration will require regular payments to restart at the end of August.
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