Regulation of student loans to promote racial justice

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Experts are investigating the need for student loan reform to address the debt crisis facing students of color.

Student loan debt currently burdens more than 45 million Americans who be to totaling $ 1.7 trillion. Although President Joseph R. Biden extended suspension of repayment of federal student loans until September 2021, resulting in a temporary grace period for millions of borrowers – it remains unclear whether the president will proceed with long-awaited plans to write off massive student debt.

Financing of higher education was discussed among politicians in recent years, with some officials offering college with free or reduced tuition and others recommending student loan forgiveness. However, many scientists and experts agree that any sensible policy proposal should take into account the disproportionate impact of financing individual student loans on borrowers of color.

Many critics of education loan forgiveness including President Biden, argue that debt cancellation for all Americans will benefit white borrowers more than those of color, because white students Keep most of the US student loan debt. However, advocates of comprehensive forgiveness dot lack of nuance in such criticism. Although more white students are in debt, a larger percentage of students of color will benefit from cancellation. Black and commercial students, most of whom are colored students –face disproportionately large problems as they tend to take on higher student loan amounts and have greater difficulty in paying off such debt.

Consumer Financial Protection Bureau (CFPB) found that blacks and Hispanics are more likely than whites to attend schools with a higher cohort default rate (CDR) – an indicator of how often certain groups of borrowers are defaulting on loans. Not only are colored pupils disproportionate concentrated in schools with higher CDRs, but individual default rates also remain higher for black and Hispanic student loan borrowers. One report based on federal data for 2017 disclosed that 48.7 percent of black borrowers and 34.7 percent of Latin American borrowers who enrolled in college in 2014 had defaulted on student loans by 2016, compared with 21.4 percent of white borrowers. For Black and Hispanic borrowers, student loan debt can undermine the benefits that higher education should give.

After passing Higher Education Act 1965 (HEA) which established the existing student aid structure, individual student borrowing became central element of higher education funding. Although the compilers of foreign economic activity intended to expand access to higher education, received student loan regime immortalized socio-economic and racial inequality. Section IV HEA grants regulatory oversight by the federal government of servicing student loans, but does not include provisions prohibiting discrimination in servicing loans.

IN Equal Credit Opportunity Law (ECOA) prohibits lenders from discriminating against applicants in lending transactions. ECOA next prohibits lending practices that have unequal impact on any protected class of borrowers, even if such practices are seemingly neutral. However, despite ECOA bans, CFPB failed provide strong oversight to ensure fairer results for color student loan borrowers. The lack of such oversight is a call to action for regulators to implement and enforce positive safeguards to protect black and Hispanic borrowers.

This Saturday seminar highlights scholars’ proposals for regulating federal student loans to address the disproportionate impact of the student debt crisis on borrowers of color.

  • IN article for Consumer Finance Act Quarterly Report, Katherine Welbeck from Student Borrower Protection Center Explains how student loan servicing companies contribute to widening the payment gap between black and Hispanic borrowers and other borrowers. New research proposes that about 11 percent of the gap between default payments is due to student loan services failing to meet their responsibility to help borrowers access a range of remedies to mitigate the economic impact of student debt. Welbeck calls on politicians establish a data collection model to increase transparency and provide additional tools for officials and litigants. Welbeck also recommends several legal approaches to rectifying student loan service contention.
  • Suzanne Kahn from Roosevelt Institute, Mark Helsman from Center of Hope for College, Community and Justice, and Jen Mishori from Foundation of the century explain in a jointly published report how race-neutral political assumptions made by US politicians led to the creation of a US education system in which debt financing of higher education contributes to inequalities in racial wealth. Student loans are “And it is more necessary and more risky for black families than for whites,” said Kahn, Hulsman and Mishori. They are to induce Policymakers need to cut college fees, tackle segregation and racial disparities in enrollment and graduation rates, tackle predatory commercial schools, and write off at least some of student debt. They are Notehowever, a higher education system cannot be fair as long as large individual loans are required to access higher education.
  • IN article in Review of Harvard Civil Rights and Civil Liberties Legislation, Dalia Jimenez from University of California, Irvine School of Law and Jonathan D. Glater from UCLA School of Law describe the student debt crisis as a civil rights issue with disproportionate consequences for black and Hispanic borrowers. Jimenez and Glater offer racial decisions, such as compensation for slavery or “child bonds” (government trusts that are passed on to children at birth). Because such a remedy is most likely collide hostility in the Supreme Court, however, Jimenez and Glater also suggest racial reforms such as loan write-offs and stronger consumer protection measures.
  • The student debt crisis has undermined the “American Dream” of an entire generation. argues Seth Frothman from Student Borrower Protection Center in article for Utah Law Review… He claims that the increased financial burden placed on African American and Hispanic students indicates that higher education is not fulfilling its role as “great equalizer”. According to Frotman, the student debt crisis sharpened due to a lack of government oversight, which allows student loan companies to abuse borrowers through illegal methods. He also criticizes the Ministry of Education’s ability to independently monitor its contracting practices. To protect the future of student loan borrowers, Frotman calls to strengthen regulation at both the state and federal levels.
  • IN working paper released by UCLA Civil Rights Project, Brian Passer and Matt Erickson from Curry School of Education and Human Development explore how the proposed PROSPER Law will affect blacks, Hispanics, American Indians and low-income students attending commercial colleges. House of Republicans presented Law on PROSPER in 2017 with the aim of reforming higher education. However, Passer and Erickson argue that the bill will harm underrepresented students due to deregulation commercial colleges and elimination specific loan forgiveness programs. Passer and Erickson instead I recommend strengthening regulation of the commercial higher education system and inviting Congress to redirect federal investment to nonprofit colleges.
  • In the recent topical research, then Student Borrower Protection Center highlights the negative impact of income sharing agreements (ISAs) on borrowers of color. ISA, through which students promise a portion of their future income in exchange for tuition dollars, perpetuate “Educational red line”. ISA disproportionate harm students of color because lenders charge them based on the school and program the student chooses to attend – two factors that confidant for the student race. While the higher education finance industry insists that ISAs go beyond traditional oversight of student loans, the Student Borrower Advocacy Center argues that agreements resemble student loans to the point that standard rules and enforcement measures must apply.

Saturday Seminar is a weekly feature that aims to present in writing the content that will be presented in a live seminar with regulatory experts. Every week, Regulatory review publishes a synopsis of a selected normative topic and then outlines recent research and research papers on the topic.

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