Black Student Borrowers Need Cancellation And They Need It Now
Fenaba Addo is Associate Professor of Consumer Science at the University of Wisconsin-Madison and Ashley Harrington is Federal Director of Advocacy at the Center for Responsible Lending.
The debate around cancel student debt has been at the forefront following the presidential election, and President-elect Biden is expected to provide substantial cancellation on the first day of his term.
This crisis has reached about $ 1.7 trillion and is disproportionately affecting Black students and students of color. General and significant student debt relief would help vulnerable students get back on their feet and create a path to financial freedom.
American borrowers need cancellation, and they need it now.
An “ important step forward ”
The truth is that measuring the benefits of forgiveness on the basis of income alone, which some opponents have argued recently, dangerously ignores the ramifications of debt on wealth.
Given the extreme and persistent racial wealth gap, white and black borrowers with similar incomes are affected differently by student debt. White borrowers generally have much more wealth and therefore have less difficulty carrying the same or more student debt than their black counterparts.
Black borrowers shoulder this burden disproportionately with every income bracket. This blatant injustice is reason enough to write off a debt that should never have been accrued in the first place.
Historically, black students have been denied or had limited access to most higher education institutions. After the passage of the Civil Rights Act 1964 and the Higher Education Act 1965 (HEA), higher education has become more accessible to black and low-income students.
But the promise to provide scholarship assistance to all low-income students was quickly broken, giving way to the debt-funded system we have today. We now have a system that deprives many black households of the means to achieve financial prosperity through higher education, which has long been seen as one of the ladders of security for America’s middle class.
Canceling student debt alone won’t close the racial wealth gap, but it shouldn’t stop us from taking this important step. Leaving black borrowers crippled with student debt certainly contributes to its persistence and prevents black and Latin American borrowers from building wealth.
So the resistance to cancellation becomes just another in a long list of ugly opposition to policies that would improve the lives of black Americans.
“ The average black borrower still owes 95% of the original balance ”
Arguments suggesting that income-based repayment (IDR) would provide more benefits to middle-income borrowers than debt forgiveness ignore the problems with the current IDR system.
Borrowers struggle to navigate plans with different structures and eligibility requirements, and managers make mistakes and maximize profits by poorly serving borrowers.
In response to a FOIA request from the National Consumer Law Center, the Ministry of education said that less than 20 borrowers had received an IDR remission as of November 2019. However, tens of thousands of borrowers should have been eligible in the past five years.
Due to years of structural racism and persistent discrimination in the labor market and the credit market, the average black borrower still owes 95% the initial balance of their student debt after 20 years of repayment. Many borrowers actually find that their balances increase over time.
IDR is an inadequate solution that will leave borrowers a lifetime in debt, steal their pensions, and force parents to pay off their children’s debt as well as theirs, certainly not a standard we should aspire to.
“ Their relief is long overdue ”
The cancellation of a substantial amount of student debt will benefit all Americans, including distressed borrowers who will see more of their loan balances written off.
The dollars that will now pay off student debt will be used to buy a house, start a family, start businesses and jumpstart the economy. Increased consumer spending will help keep our businesses alive during these difficult times.
Federal and state policies created the student debt crisis. Now is the time to recognize these failings and focus on rehabilitating a system that simply does not work for low income and low income people.
Black Americans, low-income people, Latinos and other borrowers of color, women, and veterans have all been denied the path to financial security and prosperity that is supposed to be possible with a college education. Their relief is long overdue.
We are of course not in favor of increasing inequalities. However, we believe that this country has the resources and the capacity to find creative policy solutions that will both address growing inequalities and relieve millions of borrowers from their debt.
Substantial cancellation of student debt is perhaps the most progressive and productive action a new president in an unstable economy can take. President-elect Biden must keep his promise to write off the student debt of the 45 million Americans who carry this burden on day one.