How the $15 Billion Student Loan Forgiveness Affects the Racial Wealth Gap
President Biden has extended the deadline for student borrowers before they must start repaying. The US Department of Education (DOE) estimates that this will amount to $15 billion in total student loan forgiveness due to interest charges that do not have to be paid. The Roosevelt Institute brief shows that canceling up to $50,000 in student loan debt per borrower would immediately increase the wealth of black Americans by 40%.
The breakdown you need to know: The DOE estimates that student borrowers will collectively save $5 billion per month in interest charges. Sadly, more than half of black borrowers, 58%, disagree that student loans contribute to racial equality or help them build wealth, according to The Education’s Jim Crow Debt study. Trust. Eliminating this debt will begin to narrow the racial wealth gap for young families, with 86.6% of black students taking federal loans to attend four-year colleges.
Cancellation of student debt is not regressive, in fact, it is progressive and needs to happen, CultureBanx reported. Canceling student debt would make the distribution of income and wealth more egalitarian and nearly eliminate households with negative net worth from the distribution of wealth. While this is not large-scale student loan forgiveness in the traditional sense, it will save student borrowers substantial money for their student loans, as Zack Friedman of Forbes writes.
According to a recent study in the journal Sociology of Race and Ethnicity, young black adults carry 85% more student debt than their white counterparts, and this disparity increases by 7% each year after borrowers leave school. school. Students of color typically rack up hundreds of thousands of dollars in student loans which means they are unable to focus on other financial goals like buying a home, paying off credit card debt credit and savings for retirement. A large number of black borrowers do not have “good debt”, according to the Jim Crow Debt study by The Education Trust.
Situational awareness: It is certainly possible to initiate a long-term positive impact on the racial wealth gap by addressing inequalities related to student college debt. Pew Research found that the share of students taking out loans to fund their degrees rose from 49% to more than 69% from 1993 to 2012. Four years after graduation, the average black college graduate owes 52,726 $, compared to $28,006 for the average white college graduate. If we can create systems that recognize these lived experiences, we can create more equitable outcomes for everyone.