How Student Loan Forgiveness Could Help Close The Racial Wealth Gap

“With $50,000 worth of federal forgiveness, roughly 62% of people [would] be completely debt free.”

By Kristen CabreraDecember 16, 2020 2:51 pm,

Democratic leaders in Congress are pressing President-elect Joe Biden to cancel $50,000 in debt for each student-loan borrower. Biden, in response, said he’d prefer Congress to pass a more modest relief plan. Either way, the idea has reignited a larger conversation about student loan debt, which is over $1.6 trillion in the United States.

Laura Beamer, lead researcher in higher education finance at the Jain Family Institute, told Texas Standard that she believes that student-loan forgiveness is the best way to solve the student debt crisis. It would especially help low-income and Black borrowers, but many others as well.

“Statistically, Black people borrow more [and] borrow more often. And their families have to borrow on behalf of students more often as well,” Beamer said. “With $50,000 worth of federal forgiveness, roughly 62% of people will be completely debt free.”

That amount of forgiveness, Beamer says, would also benefit the economy as a whole. That’s because unpaid student debt would be less likely to be passed down through the generations. And it also frees up younger borrowers to use that money on other things.

“Obviously, generational wealth gap, racial wealth gap-type effects are going to be huge here,” she said. “That type of spending power, getting back into the hands of young adults can make huge, huge economic impacts.”

What you’ll hear in this segment:

– How student loan forgiveness is tied to the idea of “moral hazard,” and why that’s wrong

– How student debt these days is different from that of the Baby Boom generation

– What debt forgiveness would cost the country, and whether the investment is worth it

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There Are Alternatives To Universal Student Loan Forgiveness

“If we do blanket debt forgiveness, we are forgiving the debt of everyone, including many people from upper-middle-income families who went to expensive private colleges, went to graduate school.”