Student record

Despite years of payments, black student loan balances are rising – not falling | Comment

With each passing day, the urgency to forgive the country’s $1.7 trillion student loan debt grows. The current federal pause on payments and interest rates will expire on August 31. If no federal action is taken before then, 15 million borrowers already struggling with the unfortunate combination of unsustainable debt and little or no wealth will face a daunting challenge with no financial relief in sight.

New research focuses on the dilemma of US student debt. It also details the widening racial wealth and gender gaps plaguing people who, despite years of faithful loan repayments, now find themselves owing more than less. Nearly 75% of black borrowers and 63% of Latino borrowers saw their student loan balances increase rather than decrease, compared to 51% of white borrowers.

A recently released report from the Center for Responsible Lending (CRL) complements an analysis of more than 360,000 student borrower credit reports with a nationwide series of focus groups and new analysis from the Survey of Student Finances. (EFC) 2019 Report. The report’s findings, “Relief Needed: Substantial Cancellation Will Ease Affordable Student Debt Burdens and Stimulate the Economy,” are as startling as they are widespread.

Although black America represents 12% of the nation’s population, we hold 22% of all federal debt, affecting multiple generations, including retirees. The CRL found that more than half of federal student loan debt is held by borrowers with a net worth of less than $6,370.

Additionally, since black students are more likely to enroll in for-profit colleges with lower graduation rates, debt repayment is still necessary for an education that did not enable to increase income.

“Americans who work, pay taxes and try to do the right thing have been used as cash cows to enrich irresponsible investors and corporate executives,” said Jaylon Herbin, head of outreach student loans and policies at CRL. “The real victims of these predatory lending schemes deserve to have this government-imposed burden lifted from their shoulders.”

The worst income-to-debt ratios are in majority black neighborhoods, where the average student debt balance is 102%. Low-income seniors struggling with student debt have an average debt-to-equity ratio of 127% and face an increasing tendency to seize pension benefits for lack of repayment.

The effects of historical racial wealth disparities make black students pursuing higher education more dependent on loans than family support to fund their degrees. As a result, more than half of all families headed by black people between the ages of 25 and 40 have student debt, and 85% of black graduates in 2016 took on debt to fund their undergraduate degrees.

The report also finds that black women today have a median student debt two-thirds higher than that of white men. The lingering effects of wage discrimination affecting even highly educated black women translates into gains of only 65 cents for every dollar earned by white men.

The CRL report also addresses competing proposals on student debt forgiveness.

“The cancellation of $10,000 in federal student loans erases only 22% of black borrowers’ federal student loan debt and 28% of Latin American debt,” the report said. “In contrast, the $50,000 cancellation cancels over 70% of these groups’ student loan debt.”

On May 27, a 529-member coalition of diverse interests urged President Joe Biden and Vice President Kamala Harris to exercise executive power to pardon $50,000, an amount that would be commensurate with the burden now borne.

“Black borrowers report that their student loan debt often feels like a life sentence, even though they use relief programs like income-based repayment, because they see the amount owed swell over time,” says the letter from the coalition. “Cancelling student debt has the potential to increase the net worth of Black households and could even help close the racial wealth gap.”

“We call on you to deliver on the promise of the Biden-Harris Racial Economic Equity Plan by immediately canceling federal student debt through executive action,” concluded the coalition that includes the American Association of University Women, the American Civil Liberties Union, Americans for Finance. Reform, International Brotherhood of Teamsters, National Action Network, NAACP, National Urban League, League of Latin American Citizens and CRL.

Another coalition member, the National Consumer Law Center, challenged the White House in similar terms.

“The cancellation should also be of an amount sufficient to provide significant relief to all borrowers, including black borrowers who carry an average of $24,000 more in student debt than white students four years after graduating. their university degree.