Moneybox

Why Student Loan Forgiveness Is a Racial Justice Issue

Biden raises his hands while speaking into two microphones.
President Joe Biden delivers remarks in the Cross Hall of the White House on Monday. Pool/Getty Images

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During the presidential primaries, Joe Biden characterized student loan forgiveness as “unrealistic.” When a woman recently asked the new president about a proposed $50,000 student debt relief package, he volleyed back and tried to sell a $10,000 debt relief plan. It’s clear that many of the people who got Biden elected see this issue very differently than he does. That $10,000 doesn’t seem nearly enough, and this kind of relief only cancels a certain kind of debt, without doing additional work to address the causes of rising college costs. Further, as Rep. Ayanna Pressley has pointed out, the fight over student debt relief is also an issue of economic justice for Black Americans. So just what is the best way to fix what’s ailing higher education? To try to answer that, I spoke with Slate senior economics and business correspondent Jordan Weissmann on Tuesday’s episode of What Next. Our conversation has been edited and condensed for clarity.

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Mary Harris: The drumbeat for student loan debt relief seemed to start right after it was clear Biden was going to be president. I could see politicians lining up behind this issue. Did you see the same thing?

Jordan Weissmann: Oh, absolutely. I wrote an article saying he should go for it. The reason was pretty simple. At the time Biden was elected, it was not clear he was going to have a Democratic Senate. There was this idea sitting around that academics had pushed for a while and that Sen. Elizabeth Warren had embraced: The president could forgive student loan debt unilaterally by using a section of the Higher Education Act to write off all the loans in the country, cancel it with a stroke of the pen.

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What’s interesting to me is that even after the Democrats won the Senate, people didn’t start talking about it as legislation. It was still: President Joe Biden can wipe out this debt. And it quickly became this debate about two numbers, whether the debt that should be relieved would be $50,000 and less or $10,000 and less. How did we get to these two numbers?

For a long time, when people talked about student debt forgiveness, it was a little bit of an all-or-nothing proposition. The idea was to just forgive all the debt, and often critics would respond by saying, “You’re going to give away a lot of money to doctors and lawyers and people who are pretty well off now and don’t need the help.” Warren dealt with this during her presidential campaign with a plan saying we’re going to forgive up to $50,000 in loans for people who make under a certain amount of money, that we’re going to cap forgiveness for higher earners and phase it out. She built a plan that was targeted at the middle class. During the campaign, Warren said, I will do this on day one using executive authority. And she got this opinion from the Legal Services Center at Harvard Law School saying that you can legally do this. Chuck Schumer also got behind this plan and started pushing Joe Biden on it.

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The other figure that you mentioned, $10,000, was an idea Democrats talked about when they were doing their initial rounds of coronavirus relief, during the CARES Act. It never really made it into the bill, but at the time, Biden said he would support that.

Classic congressional compromise, find something between zero and 50.

I wrote that once you’ve committed to student debt relief, there’s nothing really scientific about the idea of $10,000. There’s a rationale for it, but there’s no strong philosophical reason why you would do $10,000 instead of like $20,000.

Warren and Schumer held a press conference earlier this month where they called on Biden to cancel this debt by executive order. Is the idea that Biden can do this but just isn’t willing to?

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The argument that Biden can forgive all of this debt on his own hinges on a reading of the Higher Education Act and a specific section that says the secretary of education has the right to has the power to essentially forgive or compromise on any student loan. This was to help with debt collection. If someone owed too much, they were able to get a break on their loans. However, the language is a little bit broad. And so if you read it very, very literally, you can say they have the power to forgive and compromise on and cancel any bill, any debt that they want. The Supreme Court has been signaling that it wants to crack down on the ability of federal agencies to very creatively interpret statutes like this. Maybe the court would decide not to interfere because it would cause so much political blowback for them. But I don’t know if it’s a sure bet.

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The argument I hear a lot is that forgiving this bigger amount of debt would be a step toward achieving racial justice. I know you’ve looked at the numbers and dug into who owes what and who would be affected by this kind of forgiveness. What did you find?

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The unfortunate truth about student debt is that Black families have more of it. It’s one of the major issues that fuels the racial wealth gap in this country. For middle class households, just looking at undergraduate debt, there’s about a $7,400 difference, according to this Brookings report that came out a few years ago. A Black college graduate finishes with about $23,000 worth of debt on average versus $16,000 for a white student. If those numbers sound a little bit low to you, it’s because they include nonborrowers. If you’re only looking at borrowers, the numbers are even bigger. And that gulf between Black borrowers and white borrowers actually gets much bigger after college because Black students tend to borrow a lot more for grad school.

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The bottom line is that Black Americans, in order to get the basic credentials you need to get ahead in this country, go deeper into debt. They start the race several meters behind. That’s part of the reason why student debt forgiveness has become a big issue, a matter of racial justice in people’s eyes.

I was listening to Ayanna Pressley, the representative from Massachusetts who’s one of the legislators really pushing for more debt relief. She spoke to the American Federation of Teachers earlier this month and gave this really emotional appeal. She’s had 70-plus-year-olds come to her and say they’re still paying off student loans. She said 85 percent of Black students had to borrow, that she herself defaulted on her loans, and that Black and brown students are five times more likely to default. At one point she called the current state of student loan regulations “policy violence” and called for a kind of New Deal for colleges, to make everything more affordable. It struck me listening to her that this executive action we’re talking about wouldn’t touch some of those bigger things that she’s hungering for.

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This is one of the big questions: If you’re going to do student debt forgiveness, in what context should you do it? A lot of people are uncomfortable with the idea of just doing student debt forgiveness because you’re going to end up back in the same place after a few years unless you reform the system. If you don’t also do something about college costs and rein in predatory institutions and figure out better ways to make debt sustainable in the future, it’s going to be Groundhog Day. In fact, it actually would create incentives for some scam schools to keep charging students as much as possible because they might get forgiven. So it makes sense to pair student debt forgiveness with a big reset of how we do higher ed. But to what extent do you think student debt forgiveness is itself necessary to reset how we do higher ed? Are there other ways we could reform student loans to make them less of a burden on people?

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I’ll also say that, with what Pressley said about it being policy violence, I think that really does reflect the way it’s viewed by many Black Americans now, because, again, you’re talking about a group of Americans who’ve been asset-stripped throughout history. They were cheated out of their savings, they couldn’t get normal mortgages thanks to redlining, and they were forced into these rent-to-own schemes.

Student debt plays into that same sense of historical injustice, that other people are making money off Black Americans, whether it’s private for-profit colleges or even the federal government that makes a profit off some of its loans.

Let’s talk about the policy Biden says he prefers, eliminating $10,000 worth of college debt. What would that do? How would that compare with the bigger number?

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Ten thousand dollars would do a lot of good. It’s not $50,000, but it would help a lot of people. If you just look at the federal government’s student loan portfolio, approximately one-third of balances are under $10,000 right now. That includes some students who are still in school. But that’s just a third of all borrowers who would have debts totally forgiven for the time being unless they are still in school. Then another 20 percent of borrowers have between $10,000 and $20,000 worth of debt. So they would have their loans at least cut in half, if not more. In some ways it would very roughly target some of the people who most need help. One of the unintuitive things about student debt is that the people most likely to default actually tend to have lower balances, often former students who dropped out of school. They took out a few thousand dollars to try community college or went to a for-profit school and it didn’t work out. And nobody told them how to manage the debt afterward, and they didn’t get very good jobs. Whereas people with higher balances, they tend to have graduated or maybe they went to grad school and tend to make a little bit more money. Debt balances actually tend to grow with income. So it actually is for the most part the “smaller” borrowers who need the help most urgently.

But again, like Pressley mentioned, it’s a lack of regulations that led to this debt. To put it really simply, the government fucked up in some meaningful ways. It played a role in fueling this crisis through several means. So I think it’s morally incumbent on it to some extent to forgive some of this debt and find a way to lessen the harm.

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