Deferring Student Debt... Again
Melissa Harris-Perry: This is The Takeaway with Melissa Harris-Perry.
Alana Casanova-Burgess: I'm Alana Casanova-Burgess in for Melissa Harris-Perry this week. Actually, she's back with you all tomorrow. If you're one of the more than 35 million student loan borrowers in this country who haven't made a payment since March 2020, this one's for you.
Last week, President Joe Biden once again extended the moratorium suspending student loan repayments, this time through the end of April. Another four months potentially saving an extra $400 or $500 a month sounds like a good deal, right? But those against any student debt collection say this only postpones the financial hardship of repayments, a hardship shown to disproportionately impact Black student loan borrowers. Compared to their white peers, they often owe 50% more in debt, are almost 25% more likely to have a balance higher than their original loan, and are less likely to deduct complete interest payments on their taxes.
On average, white college grads have seven times more wealth. The pause on repayments was always intended to end eventually, it was originally set to expire back in September, then in August. It was extended through January of the new year. Now debt collection is pushed back again with repayments planned to start May 1st.
The smooth transition back into repayment is a high priority for the administration, but progressive politicians, advocates, and academics believe if the burden of loans can be continuously delayed, surely they can be canceled altogether. They say canceling student loan debt could increase the US GDP by more than $173 billion.
For more on this, I spoke with Andre Perry, senior fellow at Brookings Metro, who says this boost to the economy would be a key step in fulfilling Biden's promise to increase Black wealth in this country and narrow the racial wealth gap.
Andre Perry: The timing of the little curious to say the least, I don't think it's a coincidence that the administration announced that they were going to extend after Manchin made his announcement. The reason given is that they needed to get a handle on the pandemic, which is certainly true and the economy is still tenuous at best, and so that makes sense, but clearly, everyone sees that the Biden ministration needed to respond to progressives who are growing more and more impatient with not seeing their agenda come to fruition. It's disheartening, to say the least, because Biden ran on the promise that he would cancel at least $10,000 of student debt.
Alana Casanova-Burgess: So what's going on?
Andre Perry: For me, I'd say this racism doesn't always show up with "tiki torches" and racial epithets. Most often, it occurs with disregard. In politics, there's been colorblind approaches to policymaking that has placed Black issues in the margins. Student debt is an economic issue, but it's also a Black issue that we demanded change. A common mistake in the student loan cancellation debate is this assumption that all students across similar income strata have the same ability to pay, it's the use of income as a criteria to establishing policy.
When you use income as the only measure, you essentially bury your head in the sand to the discrimination that has throttled Black wealth over the centuries. When Biden and others essentially say that the economy is doing fairly well, and students can begin to pay back their student loans, it's ignoring the fact that Black people are much more likely to be or have low wealth.
In fact, most student borrowers have low to negative wealth, and Black people are twice as likely than white people to be in that position. When you don't attend to wealth, you are essentially thumbing your nose to the realities that Black people face every single day.
Alana Casanova-Burgess: Right. I saw a study from the Roosevelt Institute a few days ago, estimating that Black wealth would increase by about 40% if the burden of student loans was lifted. When I heard about the repayment deadline getting pushed back, I guess the first thing I thought was, it doesn't seem like the system is exactly relying on all this money from indebted folks in order to function, like people aren't making payments and somehow the earth is still spinning on its axis. Is there any reason why that shouldn't be the lesson from the extension?
Andre Perry: Actually, during the pandemic, one of the blank spots was that when we froze student loans, you started to see Black millennials, in particular, to purchase homes, to improve their financial standing, the economy itself stabilize. What we're realizing now is what the world look like if we did cancel student debt, and it would be a much better place, particularly for low wealth individuals, particularly for Black and brown people.
Alana Casanova-Burgess: What exactly would President Biden have to do in order to cancel student debt?
Andre Perry: Well, legal scholars tend to agree that the Secretary of Education essentially can cancel the student debt. As I mentioned, he's already done it for different groups on a number of occasions. All he would do is essentially have to direct his Secretary of Education to do so. He can't necessarily blame Manchin on this. He can't blame a recalcitrant Republican Party on this.
This is about his ability to cancel student debt. We're not necessarily moving towards equity that he proposed in some of his early executive orders that he wanted to close the wealth divide. Well, the one thing that is in your control, you can do and you're not doing.
Alana Casanova-Burgess: What about pressure in the other direction? Are there private actors who have influence here who are benefiting from the student loan system?
Andre Perry: Oh, certainly, there's a banking community that benefits. The Higher Ed community is not demanding to cancel student debt. As a former dean, former professor, I've seen presidents raise tuition for budgeting mistakes, for their own agendas. We don't have this push from the larger political ecosystem, but it is coming from students and working-class families themselves that canceling student debt will ultimately move us towards a system of free college, at least in the public realm.
Alana Casanova-Burgess: Do you know what the polling tells us about how popular student loan cancellation might be?
Andre Perry: According to a poll sponsored by the civil rights organization Color of Change, 40% of Black voters are unwilling to vote for a candidate who oppose eliminating student debt. Politically, Biden should have signed an executive order to cancel student debt on his first day in office. It is a very popular idea to cancel student debt. What you hear from a lot of critics is that there are other ways to help low wealth individuals. I say this all the time, at what point does an administration listen to Black voters?
Alana Casanova-Burgess: Could Biden or his team work at the edges of student loan cancellation, maybe canceling interest payments or something like that?
Andre Perry: We have debt cancellation for folks who work in public service, for instance, but at the end of the day, it's the 1.7 trillion in debt that puts not only the economic fortunes of individual families at risk but the entire economy at risk. Tuition keeps rising and the wealth profile of those who are going to college aren't improving along with that rise. We cannot ask Black and brown people, in particular, to carry the burden of us on waiting for a new system to take hold. Yes, we can work around the edges, but at some point, we have to deliver on the promise of canceling student debt.
Alana Casanova-Burgess: You mentioned critics saying that there are other ways to increase Black wealth in this country, what are those other ways that they're proposing, and do they feel disingenuous to you?
Andre Perry: There's still this belief that student loan cancellation is regressive, meaning it primarily helps the wealthy. We know most student debt is held by people with zero to negative net worth, but you hear this persistent drumbeat that it's going to help doctors for instance. During a pandemic, I say, there's actually nothing wrong with forgiving student loan debt for people contributing to society, but there's an overall belief system that we should not invest in working-class people.
Also, you will hear from critics, "Well, I paid my student loan 30 years ago." Well, in 30 years, tuition has increased threefold. It is not the same economic reality. When you only look at income and not at wealth, you are basically saying, "Hey, we're going to ignore the discrimination in the labor market. We're going to ignore decades and decades of housing discrimination that prohibited people from creating wealth. We're going to ignore the housing devaluation which sees Black homes and Black neighborhoods underpriced by 23%, on average, about 48,000 per home. Cumulatively there's about 156 billion in lost equity in Black neighborhoods. We're just going to ignore all that and you're just going to pay up.
Alana Casanova-Burgess: Have you ever heard of an argument against canceling student loan debt that you found actually compelling?
Andre Perry: No. There was a time when Higher Ed was a lecture. You could be middle class and not necessarily go to college. Those days are long over, that college has become as basic as a K-12 education, but we're asking people to go into debt. To benefit society overall, we need people to be highly educated, particularly in an era of automation.
It's actually enabling us to be fully human. We need people to go to college to get higher-order thinking skills, and this is a good thing. We can do that if we do not burden people with loans. For me, it's not a compelling argument to say we should not cancel student debt because of these reasons, no, we need for people to have access to college as much as possible.
Alana Casanova-Burgess: I've been speaking with Andre Perry, senior fellow at Brookings Metro. Thank you so much for joining us.
Andre Perry: Thanks for having me.
Alana Casanova-Burgess: What's it been like for people who haven't had to make student debt payments since March 2020? Sounds like the pause has been a huge relief.
Caller: Yes, federal student loan repayment moratorium has been a benefit to me. I've been able to pay down credit cards and even start saving a little bit of money for the first time in my life.
Terry: Terry, from Queens New York. I have a hundred thousand dollars in student debt from graduate school, which I finished in 2019. For the last six weeks or so, I've been getting emails about having to call in to set up my repayment plan. I was sweating because I'm also out of work. When I heard that the moratorium had been extended for a few more months, I was very glad because I'm hoping that I will find a job before the moratorium ends and I can get back on some kind of schedule repaying this money, although it'll probably take me for the rest of life.
Travis: Hi, this is Travis from Columbus, Ohio. I graduated with my master's in psychology in 2015 and the best paying job I could find out of school paid 18,50 an hour, working for the state of Ohio. The 2020 loan repayment moratorium allowed me, for the first time in my life, to set aside a small amount of money for investing, safety net savings, et cetera.
My investments in crypto and traditional stocks have paid off greatly. For the first time, I'm starting to feel like I'll be able to crawl out of the debt instead of facing negative amortization of my loans, which happened for the first few years after graduating.
Andrea: My name is Andrea Thomas. I'm calling from Midlothian, Texas. Yes, the student loan pause has definitely impacted me in a positive way. I was paying about $1,400 a month in student loans, which I think is absolutely ridiculous. My husband and I were able to purchase our forever home. I've been able to pay now some debt because I've not been having to pay the albatross around my neck which is student loans.
Steven Philips: Steven Philips in Two Harbors, Minnesota. Gratefully, the moratorium has been a fantastic opportunity for my daughter who has both undergrad and law school student debt. It's also been invaluable for myself, and plus loan, I'm on a social security, a disability income. Just recently lost my employment driving for the local transit authority due to an occupational injury that I was not allowed to return to work from. When this eventually returns, it may cost me my home.
Melissa: My name's Melissa. I'm in Pittsburgh and yes, the federal student loan moratorium has definitely impacted me financially. Not having the burden of the student loan debt on a monthly basis has given me the freedom to actually pay down other debts that I had and plan a little bit more for retirement and just plan for my future more which is something that I could not do with a student loan payment of over $2,000 a month.
Nick: Hi, my name is Nick from Tuckahoe, New York. The federal student loan repayment moratorium has allowed my wife and I, who both have federal student loans, to finally save up some money for a down payment for a house. While we haven't purchased a house yet because of the insane housing market, we're starting to get nervous that as the repayments come back in early next year or later that we may be dipping into the savings that we've already put down.
Liz: Hi, this is Liz from Orlando, Florida. The moratorium on student loan payments has absolutely affected me and my immediate family financially. For the first time in years, I was actually able to put away money into a savings account. I'm 32 years old, and I am now halfway toward a down payment on a house, and that wouldn't have been possible without this pause on student loan payment.
Alana Casanova-Burgess: Thanks to all of you who called to share your experiences. You can always give The Takeaway a call at 877-869-8253 or record a voice memo and email it to email@example.com.
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