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NOEL KÖNIG, HOST:
45 million Americans are in student debt, and President Biden has promised to do something about it. He suggests canceling up to $ 10,000 per borrower. However, Democrats in Congress are pushing for more – $ 50,000 per person. This is Elissa Nadworny from NPR.
ELISSA NADWORNY, BYLINE: Joe Biden made it clear that $ 1.6 trillion in government student debt is an issue. But the question of how much of it should be canceled is still on the table. Let’s take a look at the plan the president endorses to cancel the $ 10,000 debt per borrower.
ADAM LOONEY: Borrowers with the lowest student debt are the ones struggling the most.
NADWORNY: Adam Looney is an economist at the University of Utah. He says not all debts are created equal. Borrowers who have a bachelor’s degree often have a higher debt burden but can repay it. The ones who really struggle are the ones who are behind. If you are in default, the government can collect your tax refund or part of your paycheck. As you get older, you can even lose some of your social security. Approximately 8 million borrowers are in default, and most of them are less than $ 10,000 in debt.
LOONEY: The amount you borrow largely depends on how many years you enroll. Students who drop out after a semester or a year or two often have little debt.
NADWORNY: If you never got that degree, you can’t get a job paying off that debt. Looney argues that if more than 10,000 borrowers cancel who do not need help, there is a risk of reward. He points to research showing that 36% of student debt is owned by the top 20% of income-earners. But income is different from wealth. Households with student debts usually have the lowest wealth. That is the value of all your assets minus your debt. Now let’s take a look at the plans to cancel student debt of $ 50,000. Senators Elizabeth Warren and Chuck Schumer, among others, are behind this idea. They say that a more forgiving cancellation policy is also about racial justice and would target wealth gaps, especially among black families. Black households are more likely to have student debt, and more of it, than white or Latin American families.
ASHLEY HARRINGTON: The student debt crisis – it disproportionately affects color borrowers and color communities, especially black borrowers.
NADWORNY: Ashley Harrington is Senior Policy Counsel at the Center for Responsible Lending.
HARRINGTON: So when we talk about cancellation, we have to start there.
NADWORNY: Black borrowers, she says, have a hard time getting through racism in the job market even after graduating. More debt relief would give them a leg up.
HARRINGTON: You have families, borrowers of color, who have never been able to build wealth. You have no intergenerational wealth. Instead, they have intergenerational debt.
NADWORNY: Many black and Latin American families have missed wealth-building opportunities in the past due to racist policies, such as home ownership and vocational training programs. Researchers who study and speak to student loan borrowers say that student loan debt is now what is holding them back. In an upcoming report, the Center for Responsible Lending found that black borrowers who would have all of their debts canceled if $ 50,000 were canceled have a median wealth of only $ 76,000. In most cities, that’s not even a house. And of course there is the pandemic.
HARRINGTON: We’re in the middle of a crisis. And so we’ve just got to a point where $ 10,000 isn’t enough.
NADWORNY: Regardless of the dollar number, most proponents of the cancellation say it’s attractive enough to be carried out by the president through executive action without Congress. President Biden has long said that he would prefer to apply laws. But in early February, the White House signaled with the stroke of a pen that it was ready to consider this.
Elissa Nadworny, NPR News. Transcript provided by NPR, Copyright NPR.
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