USA TODAY US Edition

Forgiving loans may help close wealth gap

Student debt crushing many Black Americans

- Cristina Silva

There was no college fund, no family savings to help Jamilah Williams pay for school. After she graduated from college and landed her first salaried job, her parents reminded her that she would have to help them pay off her student loan debt.

“It was like, ‘Oh, wow, this is going to take a huge cut out of my small paychecks,’” Williams said.

Long after her student days, the $200 monthly payment has left her unable to cover other costs. If she needs to buy pet food, she puts it on her credit card. Her car broke down and she can’t afford to get it fixed.

“It means that some months there’s only a couple hundred dollars until the next paycheck,” said Williams, 30, an assistant director for marketing and communicat­ions at the University of Washington in Seattle. “I’ve never had extra left over each month to actually save anything.”

Like many other Black college graduates, Williams is burdened with student loan debt – an issue that has catapulted onto the national stage amid a debate over debt forgivenes­s and racial justice.

Economists, social justice activists and Democratic leaders in Congress pushing President Joe Biden to forgive federal student loan debt have argued that doing so would help address centuries of racist economic policies, including labor and housing discrimina­tion, that continue to make it difficult for Black Americans to acquire wealth at the same rate as white Americans.

While about 44 million Americans owe a total of $1.7 trillion in student debt, Black Americans on average owe nearly twice as much debt as white Americans, and more than Asians and Latinos. Black borrowers, who earn less, are also less likely to pay off their debt and most likely to be behind on payments, according to the Federal

Reserve.

“We are talking about people of color who have been unfairly treated economical­ly throughout the history of our country,” said District of Columbia Attorney General Karl Racine, who, along with other Democratic attorney generals has lobbied leaders in Congress to cancel up to $50,000 in federal student loan debt.

White House press secretary Jen Psaki said earlier this month that Biden is weighing whether and how to cancel student loan debt. Biden has also vowed to advance racial equity, including strengthen­ing anti-discrimina­tion housing protection­s and investing in historical­ly Black colleges and universiti­es.

Rep. Ayanna Pressley, D-Mass., has helped lead the chorus of lawmakers in Congress calling on Biden to cancel the debt. “You can’t be anti-racist if you’re anti student debt cancellati­on,” she wrote Monday on Twitter.

In Congress, Sen. Elizabeth Warren, who chairs the Senate Banking Committee’s Subcommitt­ee on Economic Policy, held a hearing Wednesday on the effect of student debt on racial justice and the economy. Warren said Black borrowers face disproport­ionate challenges in paying back such debt.

Many Black families are unable to pay for college because they have less money than white families. Black households with higher education have a median net worth of $72,000 compared with $397,000 for similar white households. Black households without any higher learning have a worth of $12,300 while white families in the same circumstan­ces have a median net worth of $106,000, according to data from the Center for Responsibl­e Lending, a nonprofit research and policy organizati­on based in Durham, North Carolina.

Williams, the university worker, has seen firsthand how having federal help or family money can make a difference. Her boyfriend, who is white and a veteran, was able to buy a house and grew his savings because he didn’t have any student loan debt and had family support.

In contrast, her Black family is solidly middle class, she said. Her parents didn’t graduate from college. Her mother is an office manager. Her father is a Border Patrol agent and has occasional­ly tapped into his retirement savings to help her pay off her debt.

“Forgiving the student loan debt would be a huge step in trying to rectify the racist history of this country,” Williams said. ”It’s a step. There’s obviously a lot more that can be done, but I think it’s a really important step.”

Black households with higher education have a median net worth of $72,000 compared with $397,000 for similar white households.

College as the best or only chance

Under Biden, the Department of Education has canceled student debt for borrowers who have disabiliti­es. And the federal government suspended federal student loan payments during the COVID-19 economic crisis through Sept. 30, 2021.

The next step should be helping families held back by centuries of oppression and racist economist policies, activists and lawmakers argue.

The lack of Black wealth has created an intergener­ational crisis, where, in some cases, Black parents struggling to pay their own student loan debt must take on more debt to pay off their children’s college education, said Ashley Harrington, federal advocacy director and a senior counsel at the Center for Responsibl­e Lending.

“The student debt crisis is absolutely a racial justice issue,” Harrington said. “For brown and Black folks, they often need to get more education to get the same salaries and positions that white folks can get with less education and that means how do they do that? They have to take on more debt.”

For those who default, student loan debt can destroy their credit, which makes it difficult to rent an apartment, purchase a home, get a job – or, for those still working toward a college degree, complete their education if they are unable to acquire more loans before graduation day.

But making the minimum payment every month can also create financial constraint­s, often forcing borrowers to delay homeowners­hip and retirement savings.

“It’s preventing wealth building,” Harrington said. “This is something that is impacting not just individual­s, it’s impacting their families, their communitie­s.”

For those who take on education debt but are unable to graduate, paying back the loans can be even more challengin­g if they are unable to secure a good-paying job, said Fenaba R. Addo, an associate professor of public policy at the University of North Carolina, Chapel Hill.

“These things have short and longterm impacts on people’s financial security and people’s financial ability,” Addo said.

The Black student debt crisis was set in motion by centuries of racist policies that made it difficult for Black Americans to build wealth, including shutting Black Americans out of various highpaying industries and jobs, along with housing programs of the past that afforded white Americans free land and low-cost housing loans while denying Black Americans the ability to purchase the most valuable property.

Lawmakers spent decades encouragin­g Black Americans to enroll in college to overcome workplace discrimina­tion and close the racial wealth gap. But Black Americans have not been able to enjoy the same benefits of higher education compared with white Americans, said Darrick Hamilton, founding director of the Institute for the Study of Race, Stratifica­tion and Political Economy at The New School in New York City.

“You know you have to be twice as good to get by,” said Hamilton, who has advocated for canceling all student loan debt and creating free or affordable undergradu­ate programs for public colleges. “If you are a young person, if you are Black, you really have no choice but to go to college if you want a pathway to social mobility.”

Dr. Renee M. Poole, a family physician in Los Angeles who has been practicing for 15 years, said racial inequaliti­es have made it harder for herself and other Black profession­als to get ahead.

Poole worked her way through medical school, budgeting $10,000 a year for living costs to help pay off her debt more quickly. She graduated with $250,000 in student loans. After 14 years of making payments, she was able to pay off her balance two months ago and start saving for retirement.

After her many sacrifices, she said, she learned of a white colleague who was paid a higher base salary despite doing the same work as Poole.

Debt as a looming obstacle

She knows education debt keeps low-income Americans and people of color from pursuing higher learning. Only 2% of all U.S. doctors are Black women. Poole said that when she mentors young people about going into medicine, they always ask about her debt.

“I try to say, ‘Don’t worry about it, it’s education debt, it’s an investment into yourself,’ but it’s really hard to sell that concept,” she said.

Racine, the D.C. attorney general, said his parents helped him and his sister pay off their student debt, and he contribute­d by working throughout college and later getting a job as a lawyer at a law firm to more quickly pay off the debt.

For Black families who don’t have similar resources, student loan forgivenes­s could mean more opportunit­ies, including putting money elsewhere in the economy or going into public service, he said. Racine said he has faith Biden would take action given the president’s commitment to racial equity and fairness.

“There is no doubt about it, the plight of the overwhelmi­ng majority of African Americans has been intentiona­lly stymied by legal discrimina­tion,” Racine said.

‘Targeted’ forgivenes­s

Some social justice activists have called on the Biden administra­tion to consider a more targeted approach to help build Black wealth.

Lodriguez Murray, senior vice president of federal policy and government relations at the United Negro College Fund, said borrowers who need it the most should get the most forgivenes­s, as opposed to a flat cancellati­on policy. He wants the government to consider how much borrowers have earned, the wealth they have amassed and their parent’s wealth.

“Quite frankly, there are those who need it more than some do and those folks should be at the front of the line,” Murray said.

Blanket cancellati­on on its own isn’t the best option to address racial disparitie­s because it wouldn’t help future graduates, said Judith Scott-Clayton, an associate professor of economics and education at Columbia University in New York City and a former expert for the Brookings Institutio­n who studied racial disparity and student loan debt. Her research shows Black borrowers owe some $53,000 in student loan debt four years after graduation day, almost twice as much as white borrowers.

Scott-Clayton said those with the lowest levels of debt often have the hardest time paying off their loans compared with those with six-figure debt who are more likely to end up in lucrative careers.

“If the focus is really on preventing the most extreme negative consequenc­es of debt delinquenc­ies and default, then prioritizi­ng low borrowers gives you the biggest bang for your buck,” Scott-Clayton said.

She advises against differenti­ating between salary and wealth over an automatic forgivenes­s plan because too much oversight could create further disparitie­s in who gets help and who doesn’t.

“Keeping it simple is really important,” she said.

Other policy experts have praised proposals to cancel student debt while warning the Biden administra­tion must go much further to address racial inequaliti­es, including considerin­g some form of reparation­s payments, a proposal popular among Black Americans and widely unsupporte­d by white Americans, according to polls.

William Darity, a public policy professor at Duke University in North Carolina, said forgiving student loan debt would give Black families a tremendous gain but would not close the racial gap in wealth.

“I think people are overstatin­g what the consequenc­es of this will be,” he said. “People are searching for some sort of alternativ­e to a comprehens­ive reparation­s plan; there’s no real alternativ­e.”

Freedom from debt

Whatever plan the Biden administra­tion decides to pursue to address student debt, many Black borrowers said they are not waiting for the government to save them.

As a child, Cleao Martin loved watching Black students thrive in “A Different World,” a popular sitcom about a fictional historical­ly black college. As she prepared to graduate from high school, she decided that she, too, would go to an HBCU.

Martin, who grew up in Tampa, enrolled in Morgan State University in Baltimore instead of the more affordable public schools in her home state of Florida. Over four years of studying engineerin­g physics, she racked up $100,000 in student loan debt.

After graduation, she wanted to continue her education to increase the odds of getting a good job with a high salary. She received a scholarshi­p to cover her master’s of science in electrical and electronic engineerin­g at Tuskegee University in Alabama.

Martin said she watched her parents, immigrants from Antigua, pay off their own student loans throughout her childhood. Her father earned his master’s degree when she was a child and her mother earned a doctorate this year.

“The idea of going to college and not getting a student loan was not an idea. I didn’t really know how else kids go to college. That was just the way. And then later on learning that kids didn’t have to pay because of their family’s ability or even work-study opportunit­ies, that concept didn’t get revealed to me until much later,” she said

As she entered the workforce, Martin said she struggled to pay off her debt.

“I would see that huge number and it felt impossible,” she said. “I was like, if the feds are going to come get me for not paying my loans I guess they are going to come get me because I felt so incapable.”

At one point, she defaulted on her debt and her parents, who had signed for the loans, saw their wages garnished.

Martin, who is now 33, married and looking to have a child, said she is building more confidence around making her money work for her. She works as a research engineer for the University of South Florida in Tampa and is considerin­g another degree, perhaps a doctorate or a second master’s degree. She is starting several businesses to fuel both her profession­al aspiration­s and financial future.

Debt forgivenes­s could help her get ahead, she said, but she isn’t counting on it. She wants to avoid the fate of her 59-year-old father, who is still paying off his student loans.

“I don’t want to be 50-anything and still trying to find financial freedom with these loans or debts,” she said.

 ?? PROVIDED BY JAMILAH WILLIAMS ?? Jamilah Williams struggles every month to pay off her student loan debt.
PROVIDED BY JAMILAH WILLIAMS Jamilah Williams struggles every month to pay off her student loan debt.
 ?? STEVE SCHAEFER/AP ?? Graduates react after hearing billionair­e technology investor and philanthro­pist Robert F. Smith say he will provide grants to wipe out the student debt of the entire 2019 graduating class at Morehouse College in Atlanta.
STEVE SCHAEFER/AP Graduates react after hearing billionair­e technology investor and philanthro­pist Robert F. Smith say he will provide grants to wipe out the student debt of the entire 2019 graduating class at Morehouse College in Atlanta.
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Martin
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Poole

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