The Student Loan Crisis Is a Racial Inequality Issue
By: Nicole Froio
Tags: Education, Society, Student Loans, Inequality, Racism

The Student Loan Crisis Is a Racial Inequality Issue

Spoiler alert: Having intergenerational wealth helps a lot

Sen. Elizabeth Warren, D-Mass., and House Majority Whip Jim Clyburn, D-S.C., hold a press conference in the Dirksen Senate Office Buidling to introduce the Student Loan Debt Relief Act to cancel student loan debt for millions of Americans on Tuesday, July 23, 2019. Photo: Bill Clark/CQ Roll Call/Getty Images

This week, President-elect Joe Biden affirmed his support during a press conference for erasing some student loan debt “immediately.” Biden repeated his support for the HEROES Act, which calls for the federal government to pay off up to $10,000 in private, nonfederal student loans for “economically distressed” borrowers as a response to the Covid-19 pandemic. While Senate Democrats are pushing for more debt relief, with Elizabeth Warren advocating for the next president to forgive up to $50,000 of debt per borrower, a crucial aspect of the effects of student loan debt is being overlooked: its role in reinforcing the racial wealth gap.

“Student loan debt has a tight relationship with racial inequality and particularly the racial wealth gap,” Suzanne Kahn, director of education, jobs, and worker power and the Great Democracy Initiative at the Roosevelt Institute and co-author of a paper that exposes how student loan debt reinforces the racial wealth gap, told ZORA. “Because Black and Brown students typically have less family wealth to draw on when they start school, they take out larger loans; when Black and Brown students graduate, they face racial discrimination in wages and job placement that make it more difficult to pay off their loans. As a result, one study found that 12 years after entering college, the median Black borrower had made no progress in paying down their loans; in fact, the balance had actually increased.”

Black women specifically are reported to have the highest student loan debt of any racial or ethnic group, according to a study by the American Association of University Women. For recent Black graduate and freelance writer Yannise Jean, 24, the impending deadline to start paying her $45,000 student loan debt in January 2021 coupled with an increasingly unstable job market during a pandemic conjures up a depressing future and an expensive present. “In terms of my future life and plans, I live in NYC, so just breathing the air here is expensive,” she said. “I live with my parents right now, and if I choose to pay their recommended monthly payments, I might not ever really have a place to call my own. It’s frustrating to be in a country that pushes a high-school-to-college — to now graduate school — pipeline only to leave people drowning afterward.”

Kahn notes that the student debt system is the result of relatively recent policy choices that force individual students to access higher education through debt financing, which has disproportionately affected students of color. Some of these policy choices were helped by the president-elect himself in 2005, when Biden backed the Bankruptcy Abuse Prevention and Consumer Protection Act, which has made it much more difficult for graduates to claim bankruptcy and discharge their debts. “It’s time for policymakers to rewrite these rules so that all students have fair and equal access to higher education,” Khan said.

“This is going to affect my future finances and my credit, if I ever want to buy a car or a home or whatever. So much of that is going to be dependent on whether I am successfully paying my student loans.”

Zoé Samudzi, 27, a Black PhD student at the University of California, San Francisco, who is currently $60,000 in debt, says interest rates might mean she spends her whole life paying off interest, which will undoubtedly affect her credit and her ability to own property and create generational wealth. “It’s a predatory system the way that university education has become this liberal marketplace as opposed to a thing that people should have access to,” she said. “This is going to affect my future finances and my credit if I ever want to buy a car or a home or whatever. So much of that is going to be dependent on whether I am successfully paying my student loans.”

The question of financial literacy and the difficulties in navigating the loan system are also a disadvantage to women of color. South Asian American Kimberly (whose surname has been omitted for privacy reasons), 28, who has a bachelor’s degree from a highly ranked liberal arts school and a masters in public health from an Ivy League school and around $100,000 in debt, says it’s not as simple as doing everything you can to pay off your loan like many people seem to believe. “It’s easy to get overwhelmed by the interest and lose the ability to afford payments,” she said. “I did everything I could — informed myself what I was getting into, made a concrete plan to stay ahead of payments, lived frugally, did not take out loans for living expenses—and still have been unemployed for months while I have the currently most relevant skill set because of our underfunded, undervalued public health system.”

As for Biden’s potential $10,000 debt-canceling plans, Khan says she is excited to see student debt cancellation on the agenda but adds that future policies must keep racial disparities in mind. “We also need to be having a conversation about how we use policies to bring down the cost of college so that institutions which are supposed to be engines of mobility are not exacerbating racial disparities going forward,” she said.

While commentators have suggested that tying debt cancellation to the Covid-19 pandemic and targeting the economically distressed might reduce criticisms from right-wing critics, it seems that the very structure of the student loan system needs change. “The solution shouldn’t be to only forgive the loans but to also alter the system,” Jean said. “Forgive the loans, cease interest, and make the six-month grace period longer.”

Samudzi finds Biden’s plan insufficient as a response to an increasingly broken student loan system that ultimately needs to change completely, pointing out it barely makes a dent in the original amount she borrowed due to interest rates. “This $10,000 plan is frustrating because we are in a position where we could recognize and eliminate all student debt,” she said. “Ten thousand dollars is probably the amount of interest that I have accrued since I’ve been in grad school in the last five years — it might help and it would be something, but it wouldn’t be nearly enough.”