The potential forgiveness of student loan debt could be one of the biggest policy shifts in the first months of the incoming Biden administration.
President-elect Joe BidenJoe BidenBiden adds to vote margin over Trump after Milwaukee County recount Krebs says allegations of foreign interference in 2020 election ‘farcical’ New DOJ rule could allow executions by electrocution, firing squad MORE has said that student debt forgiveness will be a key part of his economic agenda, though how and to what amount the loans will be forgiven has become a point of debate among Democrats.
The disproportionate impact of the debt on students of color, meanwhile, could be further accentuated in the new year, as the freeze on federal student loan payments that was implemented by the Trump administration amid the coronavirus pandemic ends at the end of December.
According to a Federal Reserve survey released earlier this year, more than 40 percent of Americans who attended college — about 30 percent of all U.S. adults — had at least some student debt last year.
The federal student aid website states that the government currently holds $1.57 trillion in student loan debt.
It’s not known what percentage of that belongs to students of color, but a study from the Consumer Financial Protection Bureau in 2016 showed that 90 percent of Black students and 72 percent of Latino students take out federal loans when paying for college, compared to 66 percent of white students.
A 2019 New York Fed analysis showed that the default rate on student loans in zip codes that were either majority Black or Latino were 17.7 percent and 13 percent, respectively, both higher than the 9 percent default rate found in majority white zip codes.
And a study from Brandeis University’s Institute on Assets and Social Policy found that “twenty years after starting college, the median debt of White borrowing students has been reduced by 94 percent — with almost half holding no student debt — whereas Black borrowers at the median still owe 95 percent of their cumulative borrowing total.”
All of this, coupled with the fact that amid the pandemic, unemployment rates for Black and Latino Americans remain higher than the national average, could see the student loan debt crisis snowball come January.
Approximately “22 million borrowers will have to resume their payments,” Andrew Pentis, a certified student loan counselor who writes for Student Loan Hero, told The Hill. “The vast majority of the eligible federal loan borrowers did take advantage of this break in the sense that they did not make payments,” he added.
“If this suspension does end at the end of the year, it will absolutely disproportionately affect Black student loan borrowers.”
Seth Frotman, executive director of the Student Borrower Protection Center, said that “there’s a very dangerous convergence between the…
Read More: Inequality of student loan debt underscores possible Biden policy shift