Cancel student debt.

Nicole Cardoza
Written By Nicole Cardoza

This topic hits home for me, as I just paid off the last of my student loans after struggling with defaults and delinquencies. It’s heartbreaking to feel policed for trying to get a good education, but that’s part of the system we live in. Today we’re looking at the opportunities that cancel student debt can have on the immediate future and generations to come.


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By Nicole Cardoza (she/her)

Conversations on student loan forgiveness sparked again Monday when President-elect Joe Biden mentioned he has plans to cancel student debt when he takes office (NYTimes). During a Q&A post-speech, Biden acknowledged how many people struggle with student loans’ burden but didn’t give specifics on his political agenda. Hopeful citizens are referencing an interview where Senator Chuck Schumer, the Democratic minority leader, stated that Biden could cancel $50,000 in student loan debt in his first 100 days (The Ink).

Although there’s likely a lot of stipulations on the exact number and no promises, it’s no surprise that many people are excited.  There’s a record number of 45 million borrowers who collectively owe nearly $1.6 trillion in student loan debt in the U.S. (Forbes). Before COVID-19, one in five federal student loan accounts were in default (Pew Trust). And although many student loan accounts are in forbearance until December 31, there’s no indication that an extension will be granted by the current administration (Washington Post).


And the burden of student debt isn’t equally distributed. Student loans weigh more heavily, on average, on communities of color. According to a 2016 analysis, over 90% of African American and 72% of Latino students take out loans to attend college compared to 66% of white students. Asian-American students who need to borrow more than $30,000 may be more likely to rely on private student loans that offer fewer consumer protections for borrowers (Consumer Financial Protection Bureau). Payback is also an issue: borrowers that identify as white pay down almost 95% of their loans 20 years after starting college. But their Black peers will still owe 95% of their original balance after the same period. Within six years of beginning college, one-third of all Black or African American borrowers who had entered repayment defaulted on their loans, compared to just 13 percent of their white peers (American Progress).

Under-regulated loan servicing makes it more difficult for anyone to pay back student loans, making it easier for people to fall into debt than a basic credit card or mortgage (CNBC). But we can’t blame this disparity on student loans alone. Like many that we cover in our newsletter, this issue is exacerbated by the myriad of systemic inequities that impact communities of color: the wealth gap between white and non-white communities, employment discrimination, and the challenges students of color face to receive scholarships. We also have to account that tuition costs are steadily rising, outpacing the average family income (CNBC).

And consequently, student loans also contribute to the same inequities, fueling a never-ending cycle. About 13%- 23% of the wealth gap between Black and white Americans is attributed to student loan debt. Because white people with student loan debt can statistically pay it off more quickly, they can start saving and spending while communities of color are still paying down debt (EdTrust). Plus, defaulting on a student loan payment can ruin credit scores and make future financial decisions more difficult, only exacerbating the difference.

I don’t want to speculate for everyone how their lives would be different if they didn’t have student loans. But for me, it would’ve been transformative. I paid $800 – $1000/mo to pay down student loan debt and defaulted multiple times while juggling several jobs and a meager salary after college. It prevented me from getting an apartment and often forced me to overdraft my bank account to keep up. Until I paid them off, I couldn’t fathom having my own space or even considering having children of my own. And I felt the constant shame of not making enough or doing enough to pay it down. While also feeling so grateful and lucky to be the first kid in my family to graduate with a degree. Now that I don’t have that burden, I feel like I can actually invest – financially and emotionally – into the future I want.

And there’s a similar sentiment among other people, and economists, too. Many believe it can boost our GPD, rally the housing market, and bolster entrepreneurship (NPR). Others center student loan debt as a reproductive rights issue, noting that more people would feel more empowered to start families without this looming debt. Of course, there’s also challenges, too – who will pay for this broad deficit, and how could it impact taxes in the future (NPR). But amid a global pandemic and a grim economic forecast, others believe this could be the infusion of capital our country needs.

You could argue that if I had waited (instead of reshuffling my debt payments because of COVID-19 so I could drive down this debt), my student loans could have been forgiven next year. But I don’t regret paying them off for a single second. I think I breathe easier each moment. And that is a gift I’d grant to anyone and everyone I can, as soon as possible, without an ounce of hesitation. 

Canceling student debt needs to be the start of a broader conversation – on reforming higher education, creating more tuition-free public colleges, and disrupting the notion that college is the only path to success. But it’s a start, one that can be implemented quickly, make an immediate economic impact, and reverberate for generations to come.

 

KEY TAKEAWAYS

  • Student loan is disproportionately impacting communities of color

  • Not only does systemic racism cause differences in student loan debt burdens, it contributes to the same issues

  • Canceling student debt offers more than financial ease, but a way to boost the economy in the short and long term

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Nicole Cardoza
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