Student loan forgiveness would help Black borrowers, who are disproportionately represented in the $1.75 trillion debt total held by 43.2 million borrowers, but a recent Twitter discussion shows there is doubt about whether or not loan forgiveness would lower the Black-white wealth gap.
HBCU alumni have a median federal-debt load of about $29,000 at graduation — 32 percent more than graduates of other public and nonprofit four-year schools. Black women have been found to have the highest student loan debt of all.
A national poll conducted by Color of Change shows most Black voters are in favor of eliminating student loan debt altogether. Results showed 56 percent of Black voters have taken out loans to fund higher education – 84 percent of whom support full or partial student loan debt elimination.
Reparations supporter Melissa Harris Petty tweeted, “Student loan forgiveness will largely increase the intra-racial wealth gap. Which is why you only see Black people of a certain class advocating for it, making it a race issues, and prioritizing it over reparations.”
Wealth inequality expert Dr. William “Sandy” Darity also cast doubt on the ability of debt forgiveness to close the racial wealth gap.
Darity tweeted in May, “Student debt forgiveness is a good idea, but it’s gaslighting to claim, persistently, that it will have much of an effect on the racial wealth gap.”
Brandeis University researchers in 2015 found that forgiving student debt only for low- and middle-income households would reduce the racial wealth gap for Black households, but eliminating student debt for all households would actually increase the racial wealth gap, according to findings in a 2015 study.
Researchers used the Racial Wealth Audit, a framework developed by Brandeis University’s Institute on Assets and Social Policy (IASP) to assess the impact of public policy on the wealth gap between white and Black households.
A research institute, IASP was part of the Heller School For Social Policy and Management at Brandeis and advances economic opportunity and equity, particularly for Black households, households of color and those kept out of the economic mainstream. In 2020, Brandeis renamed IASP the Institute for Economic and Racial Equity (IERE).
The researchers found that young Black households (age 25-40) are far more likely to have student debt than white. More than half (54 percent) of young Black households have student debt, compared to 39 percent of all young white households. Despite the higher earnings that often come with a degree, more than a third (35.9 percent) of young Black households making $50,000 a year or less have student debt, compared to 15.5 percent of young white households.
Among typical households aged 25-40, whites have 10 times the wealth of Blacks, researchers found. They analyzed data from respondents in the national 2013 Survey of Consumer Finances (SCF). White college graduates have more than seven times more wealth than Black college graduates, according to Brookings.
For low-wealth households (those at the 25th percentile of wealth making $50,000 or less), eliminating student debt reduces the Black-white wealth disparity by nearly 37 percent. Among those making $25,000 or less, eliminating student debt reduces the Black-white wealth gap by more than 50 percent, researchers found.
The study concluded that while eliminating student debt for all households regardless of income increases median net worth for young white and Black households, white families see a greater benefit likely due to a higher likelihood of completing college and graduate degree programs. Policies that eliminate all student debt for young households would actually expand the Black-white wealth gap by an additional 9 percent.
Wealth inequality experts and economists Darrick Hamilton and Naomi Zewde called for full forgiveness of student loan debt in a Feb. 1, 2021, New York Times opinion piece. “… only a full cancellation would help all borrowers who struggle with educational debt,” they wrote. “It would also begin to address the added burden that a long history of discriminatory policy places on borrowers of color, and Black borrowers in particular.”
Senators Chuck Schumer and Elizabeth Warren urged President Joe Biden to use his authority to cancel at least $50,000 in federal student debt using an executive order. “At this level, roughly 93 percent of the lowest-income Black households with student debt would experience total student debt relief,” Hamilton and Zewde wrote:
“But a full cancellation would provide the best outcome of all, and would protect young Black people who sought to use education as a tool for social mobility rather than punish them for pursuing the very credentials they need just to obtain the income of less-educated white people. Because Black graduates have more debt than their classmates, a full cancellation would even the playing field instead of leaving more Black graduates mired in the educational debt trap.”— Wealth inequality experts and economists Darrick Hamilton and Naomi Zewde
The moratorium on federal student loan payments went into effect in March 2020 at the onset of the covid-19 pandemic and the Biden administration extended it, but it expires Feb. 1, 2022. This has prompted angry accusations that Biden is reneging on his campaign-trail support for forgiving as much as $10,000 worth of student loan debt.
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