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Biden Forgiving Another $7.7 Billion In Student Debt Helps Close Racial Wealth Gap

By CultureBanx Team

  • The Biden administration will help 100,000 borrowers by erasing $7.7B in debt through existing programs
  • Student debt relief had the potential to act as a catalyst in closing the widening 6 to 1 racial wealth gap

President Biden’s latest step forgive $7.7 billion in student debt for Americans carrying heavy financial burdens from college will help more than 160,000 borrowers through existing programs. The burden of student loan debt has reached crisis levels, disproportionately affecting students of color and amplifying the racial wealth gap. Unfortunately, student loan debt is not distributed evenly across populations, it falls disproportionately on students of color and their families who are actively trying to close the racial wealth gap.

Why This Matters: Student debt relief had the potential to act as a catalyst in closing the widening six to one racial wealth gap, NPR reported. Borrowers in the U.S. collectively owe over $1.75 trillion in student loan debt, averaging $28,950 per borrower. Data from the U.S. Department of Education indicates that around 86% of Black students take out student loan debt compared with around only 68% percent of white students. A study by the Brookings Institution found that the Black-white disparity in student loan debt more than tripled just four years after graduation.

This round of student loan forgiveness includes $5.2 billion for 66,900 borrowers who have been trying to secure Public Service Loan Forgiveness, and $1.9 billion for 39,200 for those enrolled in income-driven repayment plans. Also, $613 million will go to 54,300 borrowers under the Biden administration’s new income-driven repayment option, known as the Saving on a Valuable Education, or SAVE, plan.

White Americans hold 84% of the total U.S. wealth, but make up only 60% of the population. On the other hand, Black Americans hold 4% of the wealth and make up 13% of the population. This means that the wealth of the richest 400 Americans is approximately equal to that of 43 million Black Americans, according to the Federal Reserve Bank of Minneapolis.

Student loan debt is a major issue for the Black community in general. The Roosevelt Institute brief shows that canceling up to $50,000 of student loan debt per borrower would have immediately increased the wealth of Black Americans by 40%

Future Loan Forgiveness: Four years after graduation, the average Black borrower owes $53,000, while the average white borrower owes $28,000, according to the Brookings Institute, 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. 

Forgiving an additional $7.7 billion in student loan debt is helping more people get their finances on track towards wealth building success. Moreover, 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.  

Lowering student debt is a step towards narrowing down the racial wealth gap for young families. According to the Education Department, “fewer than half of all borrowers have paid even $1 toward the principal of their balance five years into repayment.” In total, 3.6 million borrowers will have had $127 billion in debt wiped out since Biden took office.

Situational Awareness: Black women own a disproportionate amount of the $1.6 trillion federal student debt total, with higher debt averages than any other demographic. These melanated and highly educated Black women have 43% more undergraduate debt than their white women counterparts.

“My administration is doing everything we can to deliver student debt relief to as many as we can, as fast as we can,” Biden Biden said in the Roosevelt Room at the White House. Let’s hope so because there are still a lot of people in need of financial relief from student debt.

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