Critics of student loan forgiveness are wrong about who benefits and why

In late August, the Biden administration announced it would cancel student debt: $10,000 in federal student loans for those earning $125,000 or less and $20,000 for Pell Grant scholars under that same restriction. The administration also announced that under a new income repayment plan, it will cap repayment at 5% of its discretionary income and pay off any existing debt after 10 years, up from 20 years previously.

Democrats are using the momentum from the announcement as a way to potentially gain political traction ahead of the midterm elections in November. Strategically, it’s the right decision. Getting people oxygen in an already tight space is definitely a win and will pay dividends.

But air shouldn’t be scarce in the first place. The current proposal is good, but there is still room for improvement, as America’s student debt crisis begins and ends with black women, who even after this announcement still carry, on average, the burden the most. heavier. According to the American Association of University Women, or AAUW, black women have the highest amount of student debt while having the lowest returns on their college degrees.

Fifty-seven percent of black women repaying student loans in 2016 said they were unable to meet essential expenses. It’s not surprising. In 2020, black women earned 63% of what white men earned, while white women earned 79%. Not to mention, research shows that the median amount of wealth for single black women with a bachelor’s degree is just $5,000 and $500 for those without a degree. Additionally, as a professor at the University of North Carolina at Chapel Hill and New York Times Opinion columnist Tressie McMillan Cottom pointed out that many black students go into debt even if they don’t graduate. This is a crisis of epic proportions.

Opponents of the current proposal to cancel student debt have several reasons to believe the policy is terrible, including, in particular, that only the very wealthy will benefit (i.e., it is regressive ) and that those who need debt forgiveness are financially irresponsible. But these views fail to account for how race, wealth, and gender construct different economic realities for different people.

Critics of full debt cancellation often cite analyzes from the Urban Institute and the Federal Reserve Bank of New York to show the debt burden borne by different income brackets by percentile. The prevailing argument is that canceling student debt will disproportionately help high-income households because they have the largest loan balances. What both analyzes fail to adequately account for, however, is that debt burden and generational wealth differ by race and gender.

We can think of wealth here as the difference between the value of one’s assets minus one’s liabilities, or debts. Fenaba’s own research on parental wealth and the middle class alongside student debt found that black students, in particular, tend to be more loan-dependent than white students, have higher debt loads, and are more likely to default. Wealth disparities between blacks and whites are linked to black-white differences in student debt accumulation, and disparities in student accumulation and repayment have contributed to black wealth gaps and whites.

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