President-elect Joe Biden wants to immediately erase student loan debt, a move that could prove more meaningful for African American students who, on average, owe much more than anyone.
With the freeze placed on student loan repayments set to end December 31, Biden has gotten behind the Democrat-led House’s HEROES Act, which calls on the federal government to pay off up to $10,000 in private, non-federal student loans for economically distressed borrowers.
“People having to make choices between paying their student loan and paying the rent.Debt relief should be done immediately,” Biden stated during a news conference on Monday, November 16.
NPR reported that Democrats are pushing for much more debt relief.
Senate Minority Leader Chuck Schumer (D-N.Y.) co-authored a resolution in September with Sen. Elizabeth Warren (D-Mass.) calling for the next president to cancel up to $50,000 of outstanding federal student loans per borrower.
According to data from the U.S. College Board, that would mean erasing all debt for more than three-quarters of borrowers.
Andrew Pentis, the student loan debt policy expert at Student Loan Hero, pointed to an analysis published by his company, which shows student loan portfolios now total $1.67 trillion.
Further, the data shows that debt distribution is more massive among borrowers of color, particularly Black students.
Nearly nine in 10 Black students take out federal student loans to pay for college, compared with seven in 10 White students.
African American students are far more likely to have large student debt than their White, Hispanic or Asian classmates, with 59.5% of African American students borrowing more than $29,500.
Pentis noted that Black borrowers are more than twice as likely as White borrowers to default on their student loans, which he said is a by-product of a U.S. median household income that’s about $25,000 less for Black families than Whites.
The end of the federal loan moratorium would disproportionately impact Black and Brown borrowers, Pentis warned.
“Student loans have long been seen as a tool to make the wealth gap in this country better,” Pentis said.
“We are seeing that those loans are actually making the racial wealth gap worse because the loans become a burden on families that are already disadvantaged in terms of having a lower household income, having a lower net worth, and student loans can be a hindrance for families trying to achieve financial goals like buying a house instead of helping those families sort of climb the social ladder and increase their financial wherewithal.”
Student Loan Hero’s student loan debt analysis also revealed that large amounts of debt could act as a roadblock to completing college on time.
Data showed that while 42.6% of students in the Class of 2017 graduated in four years or less.
However, that number drops to 28.8% among Black students and 29.7% among Hispanic students.
For White and Asian students, Student Loan Hero said the rates were higher than average at 46.7% and 48.5%, respectively. Conversely, more Black students (40.7%) took over six years to graduate college, compared with 35.2% for Hispanic students, 25.3% for White students, and 19.7% for Asian students.
“It’s proven that earning degrees allows students to earn more income,” Pentis said.
“So if you have students not able to graduate, they’re carrying debt into careers that may not be able to pay for it. Black students are borrowing at higher amounts because of the racial wealth gap in this country.
“Typically, White and Hispanic students might borrow at relatively high rates, but they’re not borrowing as much.”