Why equity advocates should support student debt cancellation (opinion)
As recently as last year, the idea of canceling student debt was seen as a radical proposition championed mainly by grassroots movements and progressive policymakers with presidential aspirations. In the midst of COVID-19, however, more and more groups and even elected officials across the political spectrum are calling for the removal of at least some of the student debt for the country’s economic survival and recovery.
The impact of such a move would be widespread: student loans have shaped the lives of more than 40 million borrowers, from all races, classes and regions across the country. Yet the student loan crisis, like the coronavirus pandemic, has disproportionately affected some communities. Students who don’t finish college, Black students, students who attend for-profit colleges and universities, and low income borrowers tend to have the most difficulty with debt repayment.
Recently more than 40 Democratic members of Congress demanded the cancellation of $ 20,000 in student debt from each borrower because black and brown borrowers have higher default rates than their white peers. Likewise, 66 advocacy groups urged Congress to write off student debt in a way that would help all borrowers, but provide “the greatest benefit to many struggling low-income borrowers who would likely see their debt die off.” And the American Board of Education suggested that debt relief programs target “borrowers in financial difficulty and facing the greatest difficulties in repaying their loans”.
In particular, the common thread is a notion that student debt cancellation should boost equity. We agree and suggest five reasons why we think equity advocates should support student debt cancellation.
# 1: Students and families are do not responsible for their student debt. A common misconception is that students and families created this crisis by over-borrowing. This is not true. Prices for higher education have increased while financial support has stayed the same or, in some cases, has declined, leaving students and families to make up the difference themselves. CLASP estimates that the average unmet financial need, or the amount a student owes after taking into consideration all grants and scholarships, is nearly $ 5,000 per year in community colleges and almost double per year in colleges four-year nonprofit. It is even higher for the average low-income student and black and Latino students.
At the same time, associates’ degree holders borrow about $ 13,000, on average, and bachelor’s degree holders borrow about $ 30,000. Students and families therefore borrow prudently, using the loans to cover only the bare minimum of what they need to attend university. This amount tends to be a greater financial burden for students of color, who typically have fewer family assets to fall back on, thanks to long-standing discriminatory policies that have limited the ability of black and Latino households to accumulate. of wealth. In several states, the average net price of a four-year public university was up to 40 percent or more of median household income for a Latino or black family, compared to 23 percent of median family household income nationwide.
# 2: Low-income, working-class families shouldn’t have to go into personal debt to finance what is now a prerequisite for participating in the U.S. labor market. Almost all new jobs created since the last recession require a post-secondary diploma or diploma, so staying out of college isn’t really an option. During the last recession, students flocked to higher education institutions, especially community colleges, which are the most affordable option. Yet student debt has more than doubled. Today, approximately one in 10 students do not repay their student loan – a higher rate than many other types of consumer debt – which can have lasting negative effects on quality of life.
# 3: Student loan debt cancellation would help boost college completion and student success. Unfortunately, the only way many students can afford to go to college is through loans. But going to college doesn’t mean you will graduate. In addition, outstanding debt, or the fear of taking it on, can strongly discourage students who might otherwise wish to attend or return to university for their first degree or additional degrees, which are increasingly needed. indispensable. This is especially the case for people of color, who often need additional graduate degrees to increase their chances of getting a good job and earning as much as their white peers. Notably, some colleges have succeeded in using remission of debt on balances owed to the institution as a tool to re-engage underserved students and make education more affordable for them.
# 4: Existing racial inequalities in higher education play an underlying role in the student debt crisis. The disproportionate impact of student debt on black and Latino students is not a random event; it is the result of existing racial inequalities that student debt then worsens. For example, about half of all U.S. undergraduates are people of color, yet Black and latino students are severely under-enrolled in some colleges and universities, which have a higher return on investment and more financial resources to support students. At the same time, a disproportionate share of black students enroll in for-profit colleges, which perform less well for their students. And in fact, three out of four black students who attend for-profit colleges without graduating find themselves in default.
# 5: Targeting debt cancellation on those who struggle the most is possible. Policymakers and others have recommended ways to ensure that borrowers who have the most difficulty are given priority. Here are some existing proposals:
- The Center for Responsible Lending proposes to write off at least $ 10,000 of debt per student borrower, as statistics show that borrowers with balances of $ 10,000 or less tend to have the highest default rates and lowest incomes. The centre’s plan would wipe out all student debt for 40 percent of the 29 million outstanding borrowers.
- Senator Elizabeth Warren has proposed to forgive up to $ 50,000 in debt for borrowers with incomes of less than $ 100,000. Borrowers with incomes between $ 100,000 and $ 250,000 may cancel a lower amount. This plan would eliminate the debt of 95% of borrowers.
- The Education Trust has supported recent proposals to write off $ 20,000 or more in debt because we believe the amount canceled should be large enough to make a difference in the lives of students of color and students from low-income backgrounds. returned. The National Center for Consumer Law seems to agree. He suggests that the more “debt is canceled, the better off vulnerable student loan borrowers will be and the more fully they will be able to participate in our economy.”
The pandemic did not create this crisis, but it highlights the economic fragility facing the current generation, in part due to the burden of student debt. It only took a few weeks 47 million people registered as unemployed, but it will take much longer to regain a minimum of economic stability, especially if higher education remains out of reach and debt continues to stifle progress.
This is why any policy response to the COVID-19 crisis should include debt cancellation. We should see this as an opportunity to rebuild the economy, this time from the bottom up.