The Biden administration has issued four rounds of student loan cancellations, moving forward with campaign pledges that have already written off $ 10 billion in debt, with more plans on the horizon. According to a recent study by the journal Sociology of Race and Ethnicity, young black adults take on 85% more debt than their white counterparts, and this disparity worsens by 7% every year after borrowers leave school. Wealth inequality continues to be a persistent disparity in debt among black students, so getting rid of these loans could finally push the needle forward to close the racial wealth gap.
The breakdown you need to know:
Student loans have long been known as almost lifelong payment traps, severely affecting students of color, CultureBanx reported. Therefore, with the Biden administration becoming more aggressive on the forgiveness front than its predecessors, is a welcome opportunity to narrow the racial wealth gap. While $ 10 billion is a big number, that number represents about 0.58% of the $ 1.7 trillion in outstanding student debt.
In March, Biden got rid of 72,000 loans that amounted to $ 1 billion. Since then, it has canceled $ 1.3 billion in loans for 41,000 totally and permanently disabled borrowers, for a total of $ 2.3 billion in loans. Just last month in June, Biden got rid of an additional $ 500 million in student loans, again under the defending borrowers against student loan repayment rule, the current total of canceled loans s’ amounting to $ 2.8 billion.
Clear the debt:
Biden’s plan to cancel student loans is part of a larger strategy to make higher education more affordable and less financially burdensome. For those who attended public colleges or historically black colleges and universities (HBCUs) that earn less than $ 125,000 a year, student loan debt forgiveness is a huge win, because it’s no secret nobody, the cost of education is rising faster than US wages and the rate of inflation, 8x faster, to be exact.
Students of color typically rack up hundreds of thousands of dollars in student loan debt, which means they are unable to focus on other financial goals like buying a home, paying down debt. credit card and retirement savings. Eliminating that would narrow the racial wealth gap for young families, with 86.6% of black students taking out federal loans to attend four-year colleges, compared to just 59.9% of white students.
The amount of loans past due 90 days or more has not changed much since 2012, proving that the financial burden is still high, as is the unemployment rate, now at 9.6% for African Americans. Specifically, HBCU students are more likely to default over a 12-year period than African Americans attending other four-year colleges and universities, according to the Wall Street Journal. Student loan borrowers are expected to resume their payments in January 2022.