Opinion: Canceling student debt would narrow racial wealth gap and stimulate economy
President-elect Joe Biden has the power on day one as president to help close the racial wealth gap and stimulate the economy for a country on the brink of economic disaster by completely erasing student loan debt for all 45 million borrowers.
Student borrowers hold an eye-popping $1.6 trillion in debt — $1.37 trillion of which the federal government owns. Prior to the federal government suspending student loan payments as part of the spring coronavirus stimulus package, one person defaulted on their student loans every 26 seconds.
By 2021, borrowers are expected to hold $2 trillion in student debt. Millions of people struggle to pay for life necessities and meet their loan obligations. The coronavirus health and economic crisis has made the situation worse. As of last week, unemployment among African-Americans is almost double unemployment for whites, and more than 8 million people fell into poverty since May.
Black and Latino people are forced to borrow at higher rates and in larger amounts due to racial inequities in incomes and wealth. According to one study, 20 years after attending college, the median white borrower paid off 94% of their debt while the median Black borrower still owed 95% of theirs.
The reasons are simple: These borrowers must borrow more because they own less family wealth and are paid less after graduation, which makes it harder to pay back their loans. By canceling student debt, Biden could close the Black-white wealth gap among families with student loans by 25%, and the Latino-white gap among borrowing families.
Opponents of student debt cancellation claim it would be a windfall for the most privileged, like doctors and lawyers, who hold a lot of student debt. But the data show the exact opposite. Those with the least debt are more likely to default on their loans.
For example, people who left school before getting a degree because they couldn’t afford to continue their schooling or had too many family obligations are still on the hook to repay their loans. Without a degree, those students often take low-wage jobs that make it impossible to afford repaying loans for a degree they never received.
Canceling student debt means that families will have more money to meet their basic needs, afford a car or save for retirement. Plus, it would allow those who have deferred getting married and having children an opportunity to do so. A recent study showed that millennials are spending less than previous generations because they are poorer. One of many reasons for that lack of personal wealth: the weight of student loans.
Other opponents argue that it would cost too much to cancel student debt. According to recent analysis, the federal government stands to lose $435 billion of the $1.37 trillion of its student loan portfolio — meaning millions of people will default on those loans, endangering their personal credit histories.
Instead of further harming these struggling borrowers, we should stimulate our economy and tackle injustice by canceling the full $1.6 trillion student debt owed — including buying and forgiving privately held loans — and give these people a chance to build economic security for themselves and their families.
Finally, President Trump’s education secretary, Betsy DeVos, has argued that it would be unfair to those who already paid off their debt or never went to college to cancel student loans. But this completely misses the point that society works for the collective good. I have chosen not to have children, but I pay taxes to fund children’s nutrition programs, pre-K education and K-12 schools. Should I ask the government to refund my money? Of course not, because I am proudly contributing to making society better for everyone.
Canceling student debt not only would be a lifeline to 45 million people, some of whom are struggling under the weight of their debt, it would help build a more robust economy. It’s supported by a majority of Americans. And it makes good on the commitment so many leaders have made over the last year to focus on racial equity by working to close the racial wealth gap and giving Black and Brown borrowers a real chance to succeed.
However, in the end, Biden should do it because it’s the right thing to do.
Remington A. Gregg is counsel for civil justice and consumer rights at Public Citizen. He wrote this for InsideSources.com.