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Student debt and disregard for the Black middle class, by Andre Perry

Black Graduates in American School Photo: FT

*By ignoring racial wealth disparities in solutions to the student debt crisis, US President Joe Biden is abdicating his commitment to addressing discrimination, just as a higher percentage of Black people who have middle-class incomes struggle to pay off their loans in the country

Andre Perry

“The American Dream is to succeed, but how can we fulfill that dream when debt is many people’s only option for a degree?” That’s the question a woman posed to President Joe Biden during a February 16 (2021) town hall.

She asked Biden how he would go beyond his campaign promise of canceling $10,000 of student loan debt per person.

“We need at least a $50,000 minimum,” she said.

“I will not make that happen,” Biden replied sharply. His concern, he said, is that those policies would “forgive billions of dollars of debt for people” who have gone to private colleges rather than pay for other initiatives, such as early childhood education.

Biden’s response reflects a common presumption about canceling student debt: That it’s a regressive policy, a stimulus for rich folks who are more likely already working in jobs that require advanced degrees, such as doctors or lawyers.

Without going beyond a person’s income, that overdrawn thinking can lead one to assume that people who earn the same income have the same ability to pay back their loans.

All of these presumptions would be hard to hold if Black lives were centered in the policymaking process.

More and more Black people, who have historically been denied opportunities to gain wealth, are doing what we’ve always been told to do to get ahead: go to college. And it’s working.

More of them are getting jobs that place them in higher tax brackets, but that doesn’t mean they have the same ability to pay back their loans as their white colleagues.

To be clear, wealth — the sum total of all assets (homes, stocks, 401Ks) owned minus debt held (student loans, hospital bills) — is different from the income one earns from a job.

Because of slavery, Jim Crow Racism, historic housing discrimination and biased criminal justice policy, Black people have less wealth, making it much more likely for us to have burdensome student loans as a result of our striving.

In 2016, white families had the highest median family wealth at $171,000, compared to Black and Hispanic families, which had $17,600 and $20,700, respectively, according to the Federal Reserve’s calculations.

The gap is so severe that Black bachelor’s degree holders have less wealth than white people with just a high school degree. This is why a higher percentage of Black people who have middle-class incomes struggle to pay off their loans.

Actually closing this wealth gap won’t be solved by debt forgiveness. But for many Black Americans, student debt is keeping us from acquiring homes and starting businesses.

When politicians don’t mention the racial wealth gap, they are signaling that they are only talking to the white middle class.

By ignoring racial wealth disparities in solutions for the student debt crisis, Biden is abdicating his repeated commitment to address historic discrimination.

In the new Brookings report I coauthored with Carl Romer, “Student Debt Cancellation Should Consider Wealth, Not Income,” we show that complete student debt cancellation has an ameliorative effect on the racial wealth gap, while $10,000 canceled for all, which Biden has advocated, has minimal impact on that gap.

If Biden is opposed to the racial wealth gap, as he says he is, canceling all student debt is the best action to take.

During his 2020 campaign, Biden promised to cancel student debt for graduates of public universities, as well as HBCUs (Historically Black Colleges and Universities) and other MSIs (minority serving institutions).

While limiting debt cancellation to those who attend public institutions makes sense as a cost-saving measure, it overlooks an important consideration: One of the reasons some Black people go to private, elite colleges and universities is because those institutions often offer more competitive financial aid packages.

Public postsecondary institutions should be free just as primary and secondary schools are, because they are all needed to give students a chance at the middle class.

But not canceling loan debt among those who attended private institutions would be a punishment for those who made the best financial decision at the time.

Black graduates, regardless of whether they attended a private or public college, are much more likely to work in public sector jobs.

And Black teachers and physicians are much more likely to work in majority-Black areas where there is poverty.

We should be rewarding people who make the choice to fill the breaches that private industry won’t fill by canceling their student loans.

Our report shows clearly that the best way to ameliorate the racial wealth gap is to cancel all student debt.

Although not quite as impactful, our report shows that implementing Senator Elizabeth Warren’s plan, which would cancel up to $50,000 in student debt for families making less than $100,000 and incrementally less for those earning up to $250,000, would also significantly reduce the racial wealth gap.

Critics of student debt cancellation often focus on the higher income earnings of professionals, arguing that such policies would disproportionately aid already-affluent individuals at taxpayers’ expense.

But these broadside critiques often miss three key details in the labour market.

First, an American Economic Association study showed that while individuals with student loans do have higher incomes, they do not have statistically significant higher hourly wages, suggesting that student debt is forcing loan holders to work longer hours. Second, student debt pushes graduates to choose work they are less passionate about and away from public interest careers that offer lower salaries relative to corporate work.

Third, a study in the Economics of Education Review shows that recent graduates with student debt take jobs that have higher initial salaries but lower potential wage growth.

If we only look at incomes, we miss how, in reality, the Huxtables’ route to the middle class in “The Cosby Show” would have looked very different than that of, say, the Cleaver family in “Leave It to Beaver.”

A debt cancellation policy must prioritize the people who need it most. To say we shouldn’t enact a policy because it benefits those with privilege misses the current moment we’re in and a major reason why Biden got elected.

If Black lives matter, then Black people must be centered in policy considerations.

Andre Perry is a Senior Fellow in Metropolitan Policy Programme at Brookings Institution, scholar-in-residence at American University, and author of ‘Know Your Price: Valuing Black Lives and Property in America’s Black Cities’. (Bloomberg)

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