Presidential executive action to cancel up to $50,000 in student debts would increase Black wealth by 40 percent.
With many of President Biden’s legislative priorities stalled, pressure is mounting on the administration to use executive authority to cancel student debts — a move that would substantially narrow racial wealth gaps.
In a recent House floor speech, Rep. Ayanna Pressley pointed out that the student debt crisis disproportionately impacts the Black community.
“But for too long,” Pressley said, “the narrative has excluded us and the unique ways in which this debt is exacerbating racial and economic inequities, compounding our gender and racial wealth gap.”
Pressley joined Senators Elizabeth Warren and Chuck Schumer in a December letter to Biden asking that he consider using executive authority to cancel up to $50,000 in federal student loan debts. This action would immediately increase the wealth of Black Americans by 40 percent, according to Roosevelt Institute analysis.
On average, Black students have to take out larger loans to get through college than their White peers. A National Center for Education Statistics study reveals that Black Bachelor’s degree graduates have 13 percent more student debt and Black Associate’s degree graduates have 26 percent more than White graduates with those degrees.
Black women have the largest student debt burdens of all. Those who received bachelor’s degrees in 2015-2016 have average student debts of $37,558, compared to $31,346 for White women, according to a 2020 analysis by the American Association of University Women analysis of a 2017 U.S. Department of Education survey.
“Black women did what we told them to do,” Dominique Baker, an assistant professor at Southern Methodist University, told The Lily. “They made the rational choice that we put before them as a society, but because they’re Black women, that meant that they were saddled with additional student loan debt, that they attended institutions that were underfunded and were predatory, and that they face a labor market that undervalues their expertise.”
Black graduates also face greater challenges in paying off their student debt because of the systemic racism in education, employment, housing, and other areas that creates economic disadvantages. Black Bachelor’s degree and Associate’s degree holders earn 27 percent and 14 percent lower incomes, respectively, than Whites with the same degree.
Institute for Policy Studies analysis of Federal Reserve data shows that while the racial wealth gap has improved slightly, an estimated 28 percent of Black households and 26 percent of Latino households had zero or “negative” wealth in 2019 — twice the level of Whites. Families that have zero or negative wealth (meaning the value of their debts exceeds the value of their assets) live on the edge, just one minor economic setback away from crisis.
As a result of these economic disparities, Brandeis University researchers have found dramatic racial differences in long-term debt burdens. Black and White students who enrolled in college in 1995 took out relatively similar amounts of student loans: $19,500 for Black people, and $16,300 for White people. Twenty years later, the Black graduates had on average only been able to pay down 5 percent of their total amount owed, while Whites had on average been able to pay off 94 percent of the amounts they owed.
Debt cancellation would be a boost not only for Black graduates, but the economy as a whole. Research by the Federal Reserve and the Levy Economics Institute shows that once former debt holders are freed up from these financial burdens, they would have more buying power to help spur economic recovery.
Where does President Biden stand? The administration recently responded to pressure from advocacy groups and some Democratic lawmakers by granting a 90-day extension of the pandemic-related pause on student loan repayment, interest, and collections.
Braxton Brewington of the Debt Collective commended this move, but said it’s just a first step. “The Biden administration should permanently relieve this financial burden on families and the economy by using his executive authority to eliminate all federal student debt,” he told CNBC.
Biden has said he would support up to $10,000 of debt forgiveness and would prefer that happen through legislation. But the Build Back Better Act, the only major social spending bill with a shred of a chance of passing, doesn’t include student debt relief and is currently stalled.
At a time of extreme economic and racial inequalities, the administration should use every tool in its toolbox to narrow these gaps. The power to cancel federal student debts is one of the most powerful of these tools.