“Cancelling student debt is the fastest way to close the racial wealth gap”

On Tuesday, the Department of Education announced plans to change a federal student loan system, making it easier to forgive debt for low-income student borrowers. The announcement comes after the Biden administration extended the pause on student loan repayments until August 31. This latest initiative would cancel the debt of more than 40,000 government employees and allow nearly 3.6 million borrowers to receive three years of credit, at a minimum, towards eventual debt forgiveness.

Progressive Democrats and activists renew their call for the administration to cancel all student debt. More than 43 million borrowers collectively hold more than $1.7 trillion in student loans, forcing many to put off major financial decisions like buying a home, saving for retirement or starting a family.

The impact of student debt is heaviest on people of color. “Cancelling student debt, which Biden can do without congressional approval, is the fastest way to close the racial wealth gap,” UCLA professor Hannah Appel told Marketplace. “.

Our host Amy Scott spoke to Appel, professor of anthropology at the University of California, Los Angeles and co-director of The Debt Collective, about the case for canceling student debt and what it would mean for the American economy. The following is an edited transcript of their conversation.

Amy Scott: Why the big push to cancel student loan debt in particular, not other types of debt?

Hanna Call: In fact, at The Debt Collective and the Debtors Union Provocation more generally, we are organized around all kinds of household debt. We believe that, in concert with the labor movement on the right, debtors, like workers, can actually exercise much more democratic control over how these things are funded. And part of what sets student debt apart from these other types of debt is that it’s over 95% owned by the federal government. That is to say that the creditor, the regulator, the collector are one. And it happens to be an organization that, in theory, democratically meets our needs — okay, in a way that a bank, for example, still doesn’t. And so I think we’ve seen the most progress and been able to build the most power around student debt because it’s clearly a policy failure that we can hold the government accountable for. , and it can reverse the trend.

Scott: What kind of difference might that make for people with student debt, who are disproportionately low-income people and people of color?

Call : One thing that’s so important to note about student debt is that most people who hold it — over 90% through the federal government — have an interest rate above 7%. Student debt has remained at or above 7% and it is compound interest, that is, people who have paid hundreds of dollars, sometimes thousands of dollars, month after month after month for years, have only seen their balances increase, right? When we disaggregate student debt by race and ethnic identity, we find that it is black women, in particular, who bear the burden of student debt disproportionately. Canceling student debt, which Biden can do without congressional approval, is the fastest way to close the racial wealth gap. And like Ayanna Pressley said, if you want to thank black women, cancel student debt.

Scott: I have to ask you about the economic cost, although, I mean, you mentioned the trillions of dollars in student loan debt. What does this mean for the federal budget and deficits?

Call : Yes, that’s a great question. Millions of people, long before the pandemic, were already in default on their loans. That is to say not to pay them. In fact, 1 million new student debtors, long before the pandemic payment pause, would be in default on their loans. In the internal cost-benefit analyzes at the Ministry of Education that they have already done, they have already recognized internally, long before the pandemic, that they were never going to collect the vast majority of student loans. They are simply unrecoverable. So it’s a mistake to think that it’s, you know, for example, some of the counter-arguments that we hear, “Oh, this is going to be a burden on taxpayers.” On the contrary, taxes will not increase if this debt is cancelled. But in fact, [it’s] money in the pockets of those 45 million taxpayers, who are also student debtors, at a time of course when inflation is soaring, people can’t afford to buy gasoline and could really use some extra cash in their pockets.

Scott: But I want to ask you another question, which I often hear when the conversation begins. People like you and me – who, I just finished paying off my own college debt – I think a lot of people either don’t have college debt or they have paid it off. And then they think, “Why should we give these young people a break…” — or not all young people, should I say — “… when I’ve done my part? What’s your answer to that?

Call : Yes, that’s a very good question. I mean, the first thing I would say is that there are 45 million people who still owe large balances, right? Class inequality, racial inequality, the intersection of race and class inequality in this country and certainly far beyond, is one of the most pressing issues facing us all. It’s not just about student debt, is it? It’s about, what kinds of future do we want for ourselves? What kind of future do we want for our neighbours? The extraordinary debts—$30,000, $40,000, 7% interest, compound interest—that my students are leaving with today are unlike what people faced a generation ago. Again, this is a very recent political failure, and it is a failure that can be reversed.

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