With 44 million Americans struggling with unprecedented levels of student loan debt (which now exceeds $1.6 trillion), widespread student loan forgiveness has been gaining traction as a means of economic stimulus.
Increasingly, consumer advocates also view student loan forgiveness as a mechanism to reduce racial inequality, as well. Numerous studies have shown that student loan debt disproportionately impacts communities of color, and black people in particular:
- Federal data released in 2017 showed that nearly half of black student loan borrowers who entered college in the 2003-04 academic year had defaulted on at least one student loan 12 years later.
- This same data shows that black students who enrolled in school in 2004 owed more on their student loans after 12 years than the amount originally borrowed.
- According to the National Center for Education Statistics (NCES), 77.7% of black students borrow federal student loans to pay for a higher education. This figure is significantly higher than the national average for all students (60%) and for white students (57.5%).
- Black students are more likely to attend for-profit institutions. These schools are often accused of deceptive and predatory conduct, and have higher drop-out rates than other colleges and universities. 75% of black borrowers who dropped out of for-profit institutions wound up defaulting on their student loans.
- According to the American Council on Education, 30 percent of all 2015–16 bachelor’s degree recipients graduated without debt, but only 14 percent of black graduates left school debt-free. Around one third of black bachelor’s degree recipients accumulated $40,000 or more in debt, compared with 18 percent overall.
- According to a study, white borrowers pay down their education debt at a rate of 10% a year, compared with 4% for black borrowers.
These disparities are due to many factors, including educational disparities at the elementary and secondary school level, and more restricted access to college planning and college preparation, as well more limited access to programs like Advanced Placement courses and tutoring. Due to well-documented racial disparities in income, home ownership, and wealth accumulation, more black Americans must rely on debt to finance their college education than their white peers.
Is student loan forgiveness a solution to these disparities? Many advocates suggest that it could be.
When Senator Elizabeth Warren released her student loan forgiveness plan during the 2020 Democratic presidential primary campaign, she noted that black college students are more likely to rely on student debt to attend college and, because of factors like employment discrimination and disparities in wealth accumulation, they typically owe more than they originally borrowed, even after many years of repayment. “We must do more to correct these historical injustices and to ensure that opportunities are fairly available to everyone,” Warren wrote.
Other experts agree. Economic scholars and spokespersons for key consumer advocacy organizations such as the Center for Responsible Lending and Education Trust have called for broad student loan forgiveness as a mechanism for addressing inequality. “To alleviate the black student debt crisis, we must provide relief to the borrowers who are currently struggling under the weight of their student debt, ensure real accountability for for-profit institutions, and support historically black colleges and universities in their mission of educating black students,” said Ashley Harrington, senior policy counsel at the Center for Responsible Lending said in an interview with The Washington Post last year.
Even former Vice President Joe Biden, who has long resisted calls for student loan forgiveness but has since warmed to the idea, seems to recognize that solutions for the student debt crisis must factor in the associated racial disparities. Biden’s student debt plan, which includes broad student loan forgiveness, would specifically target those borrowers who attended public colleges and universities, as well as historically black colleges and universities (HBCUs) and private minority-serving institutions (MSIs).
Of course, not everyone agrees that student loan forgiveness is a solution to racial inequality. For example, Adam Looney, who directs the Center on Regulation and Markets at the Brookings Institution, wrote in a blog post that if Senator Warren’s student loan forgiveness plan was enacted, “the top 20 percent of households [would] receive about 27 percent of all annual savings, and the top 40 percent about 66 percent. The bottom 20 percent of borrowers by income get only 4 percent of the savings.” And during the Democratic presidential primary campaign, former South Bend mayor Pete Buttigieg criticized Sen. Bernie Sander’s broader student loan forgiveness plan as subsidizing the upper class, who don’t need student debt cancellation.
But the underlying statistics regarding racial disparities in student loan debt are largely undisputed. Time will tell if student loan forgiveness is a solution.