By Kyle G. Southern, Ph.D. and Charles H. F. Davis III, Ph.D.
Originally published by the Michigan Journal of Public Affairs
Today, more than 44 million Americans owe more than $1.7 trillion in student loan debt—the largest source of debt next to home mortgages nationally. Contrary to President Biden’s recent statements in response to a town hall question about his plans for student debt relief, this burden is not exclusively attributable to privileged graduates of America’s wealthiest colleges. As recent research shows, an overwhelming share of the kind of broad cancellation the current student debt crisis requires would be received by low- and lower-middle income communities and young adult borrowers.
To make good on a core 2020 campaign promise—and demonstrate a commitment to racial justice while also providing economic opportunity and tackling racial wealth gaps—the Biden administration should broadly cancel federal student debt.
Data from Michigan—a state critical to Biden’s electoral victory, where young voters and Black voters proved pivotal in securing electoral college votes for the Biden-Harris ticket—makes the case. Michigan’s data shows racial disparities in student debt and the potential benefit of addressing racial wealth gaps by eliminating onerous outstanding debt balances brought on by decades of policy failures.
Young Black and Latinx borrowers are most affected by the student debt crisis, both in Michigan and across the country. Over the past decade, the student loan debt of Black and Latinx borrowers in Michigan has increased by 71 percent and 139 percent respectively, compared to a 46 percent increase for White borrowers. Between 2009 and 2019, Michigan’s negative income growth, coupled with median student debt growth of nearly 30 percent, placed an especially heavy burden on students and families. Student debt is especially burdensome for Michigan borrowers 35 or younger, who on average hold balances of more than $34,000.
When the COVID-19 crisis hit last spring, state higher education budgets nationally had still not fully recovered from the financial crisis spurred by the 2008 Great Recession. And, to offset lower levels of state subsidies for colleges and universities, many public institutions have become increasingly reliant on tuition hikes. For example, Michigan’s public colleges and universities now receive the third most tuition revenue per full-time student nationally, trailing only Vermont and Delaware. Furthermore, Black and Latinx students in Michigan currently receive less per-student support from state appropriations than their White peers. Without a coordinating board, individual public institutions in Michigan must appeal for funding from the legislature, generally to the advantage of schools enrolling mostly White students and to the disservice of institutions serving higher proportions of Black students. Prior to the pandemic, researchers found that in Michigan, median Black students enrolled by a public university received $1,005 less in state appropriations than median White students at $4,461 and $5,466, respectively.
Together, declining state appropriations and rising tuition have shifted a greater share of the cost of college and university attendance to students and their families. Along with racist wage and opportunity gaps in the labor market, taking on such burdensome debt for their educations has entrapped Black and Latinx borrowers without the means for future repayment. According to a recent report from the NAACP, nearly half of all 2015-16 Black bachelor’s degree graduates came from households with total parental incomes of less than $35,000; half of this population owed $30,000 or more in federal student loan debt at graduation.
As economists have consistently demonstrated, broad student debt cancellation would help the economy recover by stimulating economic growth, increasing GDP, and elevating employment levels. This recovery is especially important in the midst of the COVID-19 pandemic, which has also disproportionately affected the physical and financial well-being of Black and Latinx people. Liberation from student loan debt would enable people to finish school, start businesses, and experience better overall quality of life.
Borrowers bearing the burden of student debt know how transformative broad cancellation would be, and they will remember come the next election. Recent polling shows nearly 9 in 10 Black women and 8 in 10 Black men support canceling a portion of student loan debt. Forty percent of Black voters would not vote for a candidate opposed to eliminating student loan debt. Surveyed Black voters said relief from student debt would make them better able to save for retirement, buy a home, or even leave a job where they face discrimination.
In one of his first actions, President Biden extended the pause on federal student loan repayment first put in place by the CARES Act in March 2020. This action followed two other extensions using executive authority under Biden’s predecessor. Repayment pauses have allowed borrowers to reallocate money they would otherwise have spent on loan payments toward housing, food, and other essentials during the pandemic. However, these deferrals merely postpone the crushing impact of student debt, especially for Black and Latinx borrowers.
Although Biden has shown support for $10,000 of cancellation through congressional action, this measure would do very little to address the racial inequities of the current student debt crisis. Still, Biden can use executive authority to cancel debt in a more comprehensive way that advances racial justice rather than poorly pacifies its proponents.
Members of Congress have already encouraged executive action. For example, in February, Senate Majority Leader Chuck Schumer of New York and Senator Elizabeth Warren of Massachusetts joined Representatives Ayanna Pressley of Massachusetts, Ilhan Omar of Minnesota, Alma Adams of North Carolina, Mondaire Jones of New York, and Maxine Waters of California in introducing a resolution calling on the president to cancel up to $50,000 for student loan borrowers. The recently-passed American Rescue Plan Act exempts canceled student debt from counting as taxable federal income.
While $50,000 of relief would eliminate student loan balances for 93 percent of the lowest-income Black borrowers, the smaller-scale $10,000 measure would leave the majority of those borrowers with outstanding student debt. Given the implications of such cancellation for Black and Latinx borrowers, we encourage more Members of Congress to publicly endorse the bicameral resolution and call on President Biden to use presidential authority under federal law to broadly cancel student debt.
Although debt elimination would provide urgently-needed relief, still more must be done to address college affordability at the root. Congress and the administration must work to find a new, race-conscious approach to ensuring equitable college access for historically disenfranchised communities. One such policy would pair substantial increases in federal contributions to public institutional revenues with the expectation that states narrow persistent racial equity gaps in funding and student success outcomes. Such an approach would illuminate the needs of state-supported universities, community colleges, historically Black colleges and universities, Tribal institutions, and other minority-serving institutions that largely enroll the nation’s Black, Latinx, Indigenous, and other racially minoritized students. Ultimately, policy changes must disrupt the trend of increases in tuition to which these institutions have resorted in the face of lost state and federal subsidies. Collectively, debt cancellation and improved support for the post-secondary institutions that serve Black and Latinx borrowers would ensure college is neither cost-prohibitive nor a racial debt trap with long-term economic consequences.
Data, history, and lived realities powerfully demonstrate the racial justice imperative of student debt cancellation. The Biden-Harris administration should provide direct relief by making broad student debt cancellation an immediate priority. Doing so would not only improve economic opportunity for young Black and Latinx people, but would address longstanding inequities of opportunity in higher education and society.