President Biden announced a plan to help narrow the racial wealth gap, but it does not include writing off student loan debt, which some say is necessary to take meaningful steps to close the wealth gap.
IN planwhich Biden presented on Tuesday, the 100th anniversary Tulsa car massacre, includes a total of $ 25 billion in community revitalization and transportation infrastructure and $ 31 billion in small business programs, including billions of dollars in “reinvestment in failing communities left behind by policy failures.” The administration’s proposals are aimed at narrowing the wealth gap between black and white households – according to the administration, the median wealth of a black family is about 13 cents for every dollar of wealth belonging to white families.
But refusing to write off student loan debt from actions the administration wants to take will not help address the wealth gap, NAACP President Derrick Johnson said. Washington Post…
“The components of the plan are encouraging, but it fails to address the student loan debt crisis that is disproportionately affecting African Americans,” Johnson said. “You can’t begin bridging the racial wealth gap without addressing the student loan debt crisis.”
According to black college graduates, student loan arrears average $ 52,000, and they owe an average of $ 25,000 more than white college graduates. data from the National Center for Education Statistics… Four years after graduation, nearly half of black borrowers owe 12.5 percent more than they borrowed because of interest, while 83 percent of white borrowers owe 12 percent less than they borrowed. More than half of black students say their student loan debt exceeds their net worth.
The lack of intergenerational wealth means that black households pay off their student loan debt more slowly than non-black households, according to André Perry, a senior fellow at the Brookings Institution. This affects the ability of black borrowers to acquire wealth-accelerating assets.
“The more student loans you have, the less purchasing power,” Perry said. “You have lower credit ratings. This is an obstacle to home ownership. If we really want to help bridge the racial wealth gap, we would include some provisions to abolish the student loan. ”
Despite campaigning for the president to cancel student loan arrears, Biden has yet to take any steps to do so – either through the executive branch or through a proposal to Congress for legislative action within its framework. latest budget document… Biden said he Supports $ 10,000 Cancellation student loan debt per person and sent The Department of Education and the Department of Justice should examine its legal authority to write off student loan arrears of up to $ 50,000 through enforcement action.
But total debt forgiveness may not be the best solution to narrowing the racial wealth gap, said Matthew Chingos, director of the Center for Education Data and Policy at the Urban Institute.
“Basically, if you forgive the same amount of debt for everyone, you will forgive most of the debt of whites,” Chingos said, given that, according to the NCES, white students have the largest aggregate amount of debt. “Black Americans hold a disproportionately large share of the debt, but in terms of bridging the gap, in many cases, debt cancellation can be as much as three steps forward, two steps back.”
Debt forgiveness should be only one piece of the puzzle in solving the structural problems of the student loan program, Chingos said. And that forgiveness could be aimed at addressing the racially disparate effects of student loan debt.
For example, a student debt cancellation program might target income, as did Democratic Senator Elizabeth Warren of Massachusetts. proposed during her presidential campaign… Warren called for a debt write-off of up to $ 50,000 for those with a household income of less than $ 100,000 and a gradual reduction in debt relief for individuals in households between $ 100,000 and $ 250,000.
Others, such as Perry and his colleague Karl Romer, a fellow at the Brookings Institution, argue that canceling student loan debt should focus on the welfare of the borrowers rather than their income. According to Perry and Romer, even if black borrowers have high incomes, they still often have low wealth, making it difficult to pay off student loans.
Another possibility would be to retroactively apply the doubled Pell Grant prize, as Biden mentioned. he plans to fulfill during his presidency and writing off the amount of student loan their Pell grant would have cost, Chingos said. Thus, if a student received $ 10,000 in Pell’s grant, he would receive $ 10,000 in student loan debt forgiveness.
“We have not modeled exactly what this means for the racial wealth gap, but since it is more targeted, it will certainly go to students from underprivileged families,” Chingos said.
While it is still unclear how this will or should be accomplished, canceling student loan debt is a basic necessity because attending college is a basic necessity, Perry said.
“Student loans are what we need to do to become middle class,” Perry said. “Most of this debt needs to be written off because higher education is the foundation of economic growth.”