How Student Loan Forgiveness Can Help Close the Racial Wealth Gap and Advance Economic Justice
By Marisa Wright
An Intrinstic Link: The Racial Wealth Gap and Student Loans
Borrowers collectively owe more than $1.75 trillion in total student loan debt, with the average borrower owing $28,950 individually. America’s racial wealth gap means that the student debt burden falls disproportionately on students of color and their families, with long-term implications.
The racial wealth gap describes the significant difference in the wealth held by white people and people of color in the United States. This gap is striking and staggering, encapsulated by the fact that Black households have about seven cents on the dollar compared to white households, per a 2019 report from the Legal Defense Fund (LDF)’s Thurgood Marshall Institute.
Black Students who take out student loan debt
White Students who take out student loan debt
This stark gap stems from years of entrenched, structural racism. “Racial wealth inequalities in the United States today are a direct result of centuries of racialized, exploitative social and legal structures — policies that set the foundation for a skewed distribution of land, labor, political power, and resource ownership by race. These patterns continue today and are evident in Black-white racial disparities in net worth, known as the Black-white racial wealth gap,” TMI’s report explained. These wealth disparities then contribute to significant disparities in health, education, income, and more.
As students of color begin college, the racial wealth gap often worsens. Because they have fewer socioeconomic resources — less parental and generational wealth, less home equity to finance a loan, and fewer savings — students of color are forced to take on more debt to cover tuition and living expenses to make up for the wealth gap between them and their white peers. Data from the U.S. Department of Education indicates that around 86% of Black students take out student loan debt compared with around only 68% percent of white students. Black students also typically owe more than white students. Black borrowers take out an average of $39,500 in student loans, while white students borrow an average of $29,900.
Civil Rights Principles for Student Debt Collection
Debt cancellation must extend to all student loan borrowers, regardless of degree.
All borrowers, including Direct Loan, Federal Family Education Loan (FFEL), graduate, and Parent PLUS borrowers, must be eligible for cancellation without regard to current borrower income, default status, or repayment plan. Steps should also be taken to provide relief for private student loan borrowers and to provide stronger protections against predatory student financing products.
Debt cancellation must not be limited based on the sector of institution attended.
Borrowers who attended public, private, and for-profit institutions must be eligible for cancellation. Extending cancellation only to students of public and private institutions that serve the highest concentrations of Black, brown, and low-income students, for example, would still unfairly leave out borrowers from those same communities solely because they attended a different type of institution.
The debt cancellation process must be easy and accessible.
Obtaining much-needed debt relief must be a simple process to navigate. The process should be automatic while allowing borrowers the right to opt-out if needed, instead of requiring individuals to opt-in.
Debt cancellation must not have negative credit implications.
Debt relief must alleviate, not exacerbate, racial wealth disparities and ensure thatborrowers can move forward with their lives by accessing safe and affordable credit products, capital, and other resources. Cancellation should result in positive credit implications.
Debt cancellation should be paired with policies to increase meaningful access and affordability in our higher education system.
Policymakers must use debt cancellation as an opportunity to create a better system that includes debt-free college, reforms to income-based repayment to make it truly affordable and workable, investments in institutions that best serve students of color, and accountability for predatory for-profit institutions that prey on marginalized communities.
