Student debt inequality points to possible change in Biden’s policy

The potential cancellation of student loan debt could be one of the biggest policy changes in the early months of the new Biden administration.

President elect Joe bidenJoe BidenBiden Adds to Trump Voting Margin After Milwaukee County Recount Krebs Says Allegations of Foreign Interference in 2020 Election ‘Ridiculous’ New DOJ rule could allow executions by electrocution, a firing squad PLUS has said that student debt cancellation will be a key part of its economic agenda, although how and in what amount loans will be canceled has become a point of debate among Democrats.

The disproportionate impact of debt on students of color, meanwhile, could be further accentuated in the new year, as the freeze on federal student loan payments implemented by the Trump administration amid the crisis. coronavirus pandemic ends at the end of December.

According to a Federal Reserve survey released earlier this year, more than 40% of Americans who attended college – about 30% of all American adults – had at least one student debt last year.

The Federal Student Aid website says the government currently holds $ 1.57 trillion in student loans.

It’s unclear what percentage of that percentage belongs to students of color, but a 2016 Consumer Financial Protection Bureau study found that 90% of black students and 72% of Latin American students took out federal loans when they paid for it. university, compared to 66%. of white students.

A 2019 New York Fed analysis showed that the default rate on student loans in postcodes that were predominantly Black or Latin was 17.7% and 13%, respectively, both of which were above the default rate. 9% found in majority white postal codes.

And a study by the Institute on Assets and Social Policy at Brandeis University found that “twenty years after entering college, the median debt of white student borrowers has been reduced by 94% – with nearly half without student debt – while black borrowers still sit at the median. owe 95% of their cumulative loans. “

All of this, added to the fact that amid the pandemic, unemployment rates for blacks and Latin Americans remain above the national average, could see the student loan crisis snowballing in January.

About “22 million borrowers will have to resume their payments,” Andrew Pentis, a licensed student loan adviser who writes for Student Loan Hero, told The Hill. “The vast majority of eligible federal borrowers took advantage of this disruption in that they did not make payments,” he added.

“If this suspension ends at the end of the year, it will absolutely disproportionately affect black student borrowers.”

Seth Frotman, executive director of the Student Borrower Protection Center, said that “there is a very dangerous convergence between the communities that have been hit hardest by the student debt crisis and hit hardest by the fallout from the pandemic. “.

Among Biden’s extensive list of educational policy reforms, the former vice president said he supported the cancellation of $ 10,000 in student debt for each individual borrower, doubling of Pell grants, and improvement of the existing public service loan forgiveness program and free public education provision. to students who come from households earning less than $ 125,000 a year – an idea that was originally pioneered in Congress by progressive Sen lawmakers. Bernie sandersBernie Sanders In defense of incrementalism: A call for radical realism Thomas Piketty says pandemic is an opportunity to tackle income inequality, Trump will soon be removed from office – but polarization is not going anywhere MORE (I-Vt.) And Rep. Pramila JayapalPramila JayapalBiden firm largely chooses to unify Democrats – Democrats so far ignore calls for Biden to play hard on Trump firm choice, lawyers step up efforts to reverse election result MORE (D-Wash.).

“It holds people back. They have real problems. They have to make choices between paying off their student loans and paying their rent, ”Biden said this month.

However, there is friction between the incoming administration and the progressives over how reforms, especially the automatic cancellation of student loans, should be implemented.

Minority Leader in the Senate Chuck schumerChuck Schumer US National Security Policy at 117th Congress and New Administration Voters say Biden should make coronavirus vaccine a priority: New York subway service could be cut by 40%, officials warn MORE (DN.Y.) and Sen. Elizabeth warrenElizabeth Warren Thomas Piketty Says Pandemic Is An Opportunity To Tackle Income Inequality The Memo: Biden Faces Tough Road To Commit To Healing Disney Nation Laying Off 32,000 Workers As Coronavirus Hits Theme Parks MORE (D-Mass.), Who sees student debt cancellation as a necessary aspect of America’s economic recovery, has pushed Biden to wipe out as much as $ 50,000 from every borrower – and do it through of a decree on the first day of his presidency.

“The President of the United States has the power to globally write off student loan debt, help close the racial wealth gap and give families and our economy a big boost,” Warren said in a statement.

Biden hesitated over the $ 50,000 figure and the idea of ​​using executive action, although such action would most likely fall within his presidential powers.

Getting a student loan debt forgiveness of even $ 10,000 per borrower through Congress could be a difficult task, as the Democrats are very likely out of control of the Senate.

Senate Republicans agreed to an initial freeze on student loan payments under the trillion-dollar coronavirus relief CARES law in March, but did not support an extension of the freeze in their failed proposal to another stimulus package in July.

While the freeze was eventually extended by President TrumpDonald John Trump Biden Adds to Trump Voting Margin After Milwaukee County Recount, Krebs Says Allegations of Foreign Interference in 2020 Election ‘Prankster’ Republicans Ready to Become Loss-Making Falcons under President Biden PLUS in August, the outgoing president and his allies previously declared their opposition to large-scale debt cancellation, as proposed by Biden.

The right-wing Center for a Responsible Federal Budget said in a report that blanket student debt cancellation would act “badly” as an economic stimulus and that blanket student debt cancellation is “unlikely. well targeted to those experiencing loss of income. “

Frotman, however, said Biden had a “unique opportunity”.

“With the incoming administration, a new secretary of education has the ability to fundamentally reform the student loan system and dramatically limit the amount of student debt that tens of millions of Americans have,” he said. declared.