The Student Debt Crisis

The time to pass universal student loan forgiveness is now. To date, more than 45 million current and former students are burdened with student debt, with collective debt exceeding $1.6 trillion. The current global pandemic has only exacerbated this crisis, and Black and brown students bear the brunt of this burden: Black and Latinx students default on their loans 14% and 34% more than white students. Black students also graduate with significantly more debt. Four years after graduation, Black students hold up to $53,000 in student loans, twice that of white students. To root out this crisis and its effect on wealth inequality, lawmakers need to take radical action. By canceling debt, we would give greater financial flexibility to current and former students who are struggling with the ramifications of the Coronavirus and cut the wealth gap in half for Black students. We would level the playing field for students of color who disproportionately take on more debt and default at higher rates than white students.

Wealth can significantly impact an individual’s choices in life, and lack of wealth can severely limit their chance of upward economic mobility. This is especially true for families of color. The compounded effects of decades of discriminatory laws have created the racial wealth gap, in which white families have ten times the wealth of Black families and eight times that of Latinx families.

Many policymakers have touted higher education as the remedy to this problem, arguing that a degree is the silver bullet to solving wealth disparities and increasing an individual’s chance to climb the socio-economic ladder. Yet the cost of tuition at institutions of higher education has tripled in the last thirty years alone, creating a nearly insurmountable financial barrier to entry for many low-income Black and brown families.

The decade since the Great Recession has set off a domino effect of consequences for families of color and higher education funding. Since 2008, it has been estimated that families of color lost more than half of their net worth and still have not been able to recover from this loss economically. At the same time, state government investment in institutions of higher education has significantly fallen. In 2018, state funding for colleges and universities was more than seven billion less than what was available in 2008. To account for shrinking funds, colleges and universities have been forced to increase the cost of tuition. These tuition increases, coupled with a widening racial wealth gap, has forced students of color to take on more student loan debt than ever. This increased reliance on loans has significantly increased America’s collective debt. In 2010, America’s collective student loan debt was an estimated $845 billion. Ten years later, the U.S. currently surpasses over $1.7 trillion in student loan debt. Furthermore, while the average student debt in 1996 was $12,750, students now hold an average of $30,000. With familial wealth and tuition costs trending in opposite directions, the promise of upward economic mobility through degree attainment feels more and more like an unrealizable dream for many.

Perhaps unsurprising given the persistence of the racial wealth gap and rising costs of higher education, Black and brown students are more likely to take out student loans — the Student Borrowing Protection Center recently found that 90% of Black and 72% of Latinx students take out student loans, compared to the 66% of white students. Black students also take out 50% more debt to complete their bachelor’s degree than white peers, setting the stage for a grim future after graduation. The odds are often already stacked against borrowers of color, as Black and brown students are usually given higher than average interest rates, particularly if they are attending a Historically Black College or University (HBCU). 20 years after graduating, the median debt of white students has been reduced by 94%, while Black students still owe 95% of their cumulative total. With this in mind, it’s no surprise that Black and brown students default on their loans at a much higher rate and see their debt triple over the years after graduation.

COVID-19 is disproportionately impacting families of color and deepening the racial wealth gap. Savings accounts are being ravaged, small businesses are forced to shut down, thousands are being laid off, and months of back rent will soon be due. With collective debt growing, the federal government’s pausing of student loan payments is a short-sighted solution to a growing, looming shadow many Americans will have to combat. And while this is no doubt a temporary relief, what happens after the pandemic has ended? Incremental, short-sighted policies are not going to help the millions of millennials and their families who are sinking in debt, who desperately need relief now.

We are living in a time of unprecedented government spending. Since the start of the pandemic, the government has spent over $6 trillion in relief packages, resources and services. These relief packages total more than three times that of collective student debt, yet still politicians lament over canceling student loans. Because student loan debt is so deeply intertwined with the racial wealth gap, student loan forgiveness is imperative to closing it. Eliminating student loan debt is a policy solution that will help facilitate restorative economic justice and prioritizes righting some of the economic oppressions that have harmed communities of color.

While some may argue that forgiving $1.6 trillion in loans is too costly, the long-term benefits to this policy would far outweigh the cost. Not only would this cut the racial wealth gap in half for Black students, but canceling debt will also boost the economy by $1 trillion over the next ten years and create over a million new jobs. This return to investment should be motivating to lawmakers, as it will put money back into the hands of students and Americans who sorely need relief because of the global pandemic.

Loan forgiveness is not a question of whether students are worth investing in — they undoubtedly are — abut rather a question of political will. To root out this crisis and its effect on wealth inequality, policymakers need to take bold action and forgive student debt entirely with no strings attached to borrowers. The system itself is broken and anything other than wiping out debt would simply be putting a band-aid on a festering wound. Now is the time for radical change: we don’t want to have to look back on this moment and wonder what more we could have done.