By Remington A. Gregg and Abi Velasco
Forty-five million people in the United States owe more than $1.7 trillion (that’s right, trillion, not billion) worth of student loan debt. That number is expected to rise to $2 trillion by 2022 if policymakers fail to act. During the course of the COVID-19 crisis, borrowers have been given a reprieve from making payments on their student loans. This has served as a lifeline for millions. In February, those payments are set to resume unless President Joe Biden continues the payment pause. This week, Public Citizen is leading a week of action to urge Biden to extend the payment pause and also to urge him to take the additional action of cancelling student debt. This is particularly pressing as the new Omicron COVID variant begins to rage across the country and prevent us from regaining a measure of normalcy.
Recently, Public Citizen asked our Twitter followers how they would be impacted if the Biden administration allowed payments to restart. We were inundated with heartbreaking responses from borrowers who said that resumption of payments would leave them in precarious financial situations and force them to forgo paying for other expenses they need to survive, such as rent, car loans, and home repairs. One borrower said they would be forced to get a second job to help pay back the loans. Perversely, however, the additional income would make their monthly loan payment higher than it was before the pause.
Higher education is often touted as the only real way to climb the economic ladder in a continuously competitive world, but the debt it creates often keeps borrowers from a solid financial future. For example, the student loan payment pause has been the first time some have had the opportunity to put money into a savings account and feel more financially stable. This is incredibly significant since according to the financial website Bankrate, more than half (51%) of Americans surveyed this year said they did not have three months’ worth of savings for an emergency. And 25% responded they did not have one month’s worth of savings.
The Student Loan Crisis Disproportionately Impacts Borrowers of Color
The student loan system is flawed. Teenagers are convinced to take on thousands of dollars of “good debt” to help them attain better jobs, higher wages, and fulfill the promise of the American Dream. But this promise of upward economic mobility through educational attainment does not always occur, especially for people of color.
Enslaved Africans in the United States were denied education for centuries by slave owners. During the era of reconstruction, Black communities in former slave-holding states saw the importance of education in achieving full independence and prosperity. Racist policies to stop Black Americans from obtaining quality education, such as the “separate but equal” doctrine, were enshrined into law. In addition to segregated schools, Black Americans’ struggle to access education would continue in the form of poorly funded public schools, heavy policing of Black students, and the cost of higher education which meant that it remained out of reach for many.
Due to the high cost of higher education—and the lack of generational wealth that assists making higher education possible for white students—Black students take on higher financial burdens than white students. Black students have even been saddled with higher interest rates to finance their education. After graduating college, Black borrowers take longer to pay off their debt due to the discrimination they face in the job market that makes it more difficult to secure jobs that align with career goals. As a result, Black borrowers owe nearly twice the amount of student debt four years after graduation. Even more staggering, the median Black borrower owes 95% of their debt twenty years after starting college while the median white borrower has paid 94% of their debt.
Student loan debt disproportionately affects Black borrowers and other racially marginalized communities. Latinx college students have lower rates of completion compared to white students, which complicates loan repayment. Native American students face high rates of default and many tribal colleges and universities no longer take student loan money.
Student Debt Cancellation Would Begin to Close the Racial Wealth Gap
The racial wealth gap between white, Black, and Latinx people continues to grow. Black Americans face persistent discrimination in housing and the labor market, and are disproportionately targeted with predatory financial products. Simply attaining higher education does not eliminate the racial wealth or income gap between white and Black workers. White college graduates are more than seven times more wealthy than Black college graduates. Moreover, a 2018 report found that a family with a college-educated Black head of household has less wealth than a white family with a head of household that did not graduate with a high school diploma. It is clear that simply gaining a college degree does not close the racial wealth gap. In fact, it appears to be making it worse.
And this is where President Biden comes in. The Biden administration has the ability to take the first step in addressing the historical and ongoing discrimination Black Americans have faced in the education system by cancelling up to $50,000 in student debt. And he has the authority to cancel student debt by executive action under the Higher Education Act of 1965.
Public Citizen joined more than 100 organizations in urging President Biden to use his executive authority to cancel student debt. According to the Department of Education, cancelling student debt would provide much needed financial relief to more than 80% of those with student debt. Cancellation would be especially impactful to Black borrowers, especially low-income workers, who are disproportionately women of color. According to the Roosevelt Institute, “careful analysis of household wealth data shows that student debt cancellation—at all proposed levels—is progressive; it would provide more benefits to those with fewer economic resources and could play a critical role in addressing the racial wealth gap and building the middle class.”
Since day one, President Biden has made it clear that equity plays a central role in his administration. The Biden-Harris administration has already put into motion some transformative policies and programs to advance equity. Cancelling student debt is another important step in creating equitable change for Black and Brown people in the United States. Public Citizen is proud of the work we’ve done so far to secure a more stable financial future for borrowers, but we know a lot more work must be done to ensure that all borrowers, including borrowers of color, have the better access to upward economic mobility that would come from being freed from the anchor of unmanageable student debt during a global pandemic.
Send a message to the President and urge him to extend the student loan payment pause and then cancel student debt.