Some politicians argue that forgiving student loans will help narrow the racial wealth gap. However, the impact is small and does not address the real issue of the race pay gap.
Student loan forgiveness mainly benefits students who have borrowed to pay for college tuition. This does not affect students who did not borrow and people who did not go to college. Thus, widespread student loan forgiveness is limited in its potential impact on the national racial wealth gap.
Of course, black students are much more likely to take out loans to pay for college tuition, and they graduate with more debt. Among bachelor’s degree recipients, 84.9% of black graduates are in student loan debt, compared with 69.4% of white college graduates in the National Postsecondary Student Aid Survey (NPSAS) 2015-2016. They also come with an average student loan debt of $ 3,900 ($ 33,993 vs. $ 30,093).
The debt deficit on racial student loans increases significantly just four years after graduation. In 2008, black bachelor degree recipients graduated with $ 3,374 more student loan arrears than white bachelor degree recipients, according to a 2012 Longitudinal Bachelor’s and Beyond Study (B&B). Four years later, the student loan debt gap had grown to $ 19,370. Student loan payments accounted for a third of income (34%) for black college graduates in 2012 compared to a quarter of income (24%) for white college graduates.
The significant rise in the student loan debt gap four years after graduation suggests that the racial wealth gap is caused not only by the student loan debt gap, but also by the racial pay gap. Thus, writing off student loans will not completely solve the problem, as black college graduates will be paid less than white college graduates despite having the same degree.
Moreover, widespread student loan forgiveness benefits more white borrowers than black borrowers. More than half of the money from widespread student loan forgiveness will go to white borrowers (56%) and only 18% will go to black borrowers.
This is why student loan forgiveness should be income-oriented (or debt-to-income ratio) to help borrowers in economic hardship.
Black borrowers are more likely to miss their student loans. 29.3% of black borrowers do not pay off their federal student loans within six years of going to college, according to a 2017-2012 follow-up survey for primary secondary school students (BPS). By comparison, there are 12.2% of white students.
Student Loan Forgiveness Checkout will help all borrowers, including both black and white borrowers in financial difficulty.