(Bloomberg) -- Subscribe to The Pay Check on Apple PodcastsSubscribe to The Pay Check on SpotifyFor Black Americans, the prospect of student debt forgiveness, currently under consideration by President Joe Biden, would be especially welcome.
As the cost of college has skyrocketed, student debt burdens have, too, with minorities carrying the brunt of those financial obligations. Black students are more likely to take on debt to pay for school, studies have found, and they’re also likely to have higher debt burdens, compared to White graduates who take out loans. Black college students owe, on average, $7,400 more than their White peers on graduation day, 2016 research by the Brookings Institution found. Four years later, those same Black students owe almost $25,000 more than White students, due to differences in repayment and default rates.
But here’s the conundrum: Even taking student debt into account, more education predicts higher income and wealth. For full-time, year-round workers in their mid-20s and 30s, having at least a bachelor’s degree is worth an additional $23,000 a year in income, according to U.S. Census Bureau data.In episode 5 of The Pay Check, we look at how closing the education gap was one of the first major attempts to create more economic opportunity for Black Americans, and why that movement has largely failed to close the racial wealth gap in the U.S.
Affirmative action measures, first put forward by President Lyndon Johnson, set aside government contracts for minority-owned business. They also radically changed the racial makeup of schools, by allowing schools to weigh race in admissions. But even as the pace of Black Americans attending college has risen to 36% from less than 1% 80 years ago, the wealth gap has stubbornly persisted.
Researchers at the St. Louis Federal Reserve, in a 2017 paper titled “College is not enough,” argued that increased access to higher education alone won’t eliminate the disparity. Unobservable factors like “discrimination and other long-lasting disadvantages” are at play, and they say, more radical changes are needed.
In recent months, policymakers and activists have argued that canceling all student loan debt could be one of those moves.
In February, members of Brookings’s Metropolitan Policy Program, argued for the complete cancelation of all student debt, specifically as a remedy for the racial wealth gap. Most critics of canceling student debt, argue it’s a regressive tax. But Andre Perry, of Brookings, says that’s only if you consider incomes, not wealth.“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,” he wrote in a recent Bloomberg CityLab article. His research has found that canceling all debt — not just the $10,000 proposed by Biden — would vastly improve Black wealth, especially for low-net worth households, and reduce the racial wealth gap.
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