As conversations around social justice equity, racial parity and building financial stability in the Black community remain at the forefront, the plight of African American college students should remain a topic of conversation. Tuition has more than doubled since the 1980s, but salaries have not increased at the same rate, and the heavy burden of student loan debt is greater now than at any point in time. Forty-five million Americans owe a total student debt of $1.6 trillion.
Any 20-something-year-old, armed with their college degree and ready to take on the world would be hobbled by five or even six figures of debt as they take their first tenuous steps into real adulthood outside of the academic bubble. But some groups, namely Blacks, are hit harder than others.
The COVID-19 global pandemic has further highlighted how certain demographics are disproportionately, economically vulnerable in times of crisis. That lack of financial security includes the inability to repay student loan debt. Poor working-class people who have jobs deemed “non-essential” and who do not have the privilege of working from home have seen their income vanish. Paying down school debt becomes much less of a priority when housing, food, and utilities are on the line. Additionally, as payments are missed and credit scores go down, Black people are not in a good position to acquire other loans to make large purchases for homes, vehicles and business investments.
A study that followed student loan borrowers who entered college in the 2011-2012 school year, found that nearly one-third of Black students defaulted on their loans by 2017, compared to just 13 percent of their white counterparts. Across all racial categories, borrowers who dropped out of school and those who attended for-profit institutions (such as the now-defunct Trump University), were significantly more likely to default after just a few years than borrowers who earned a degree and/or attended public universities and traditional private colleges.
Black people often end up in the demographic struggling to repay student loan debt for a variety of socio-economic reasons caused by systemic racism that wreaks havoc on generation after generation in a cruel cycle of poverty and resource deprivation. With a global pandemic underway and many bending under the stress of financial insecurity and record unemployment that has hit Black Americans particularly hard, people are taking a good look at what type of economic relief the 2020 presidential candidates have to offer.
Democratic candidate, Joe Biden, has put forward a student loan debt cancellation plan for people who earn $125,000 a year or less. The plan would forgive all undergraduate federal student debt for borrowers who attended community college, four-year public institutions, or private HBCUs. According to his plan, the federal government would cover the student loan payments for eligible borrowers. Biden’s plan applies only to undergraduate debt and federal loans.
Those who earn less than $25,000 per year would not be required to make payments at all and those who make more than $25,000 per year would pay no more than 5 percent of their discretionary income to federal student loan payments. After 20 years, federal student loans would be forgiven and no taxes would be owed.
“I believe that as we are being plunged into what is likely to be one of the most volatile and difficult economic times in this country’s recent history, we can take these critical steps to help make it easier for working people to make ends meet,” said Biden when he announced the plan in April. He also acknowledged that he adopted the plan from Vermont Sen. Bernie Sanders’ suspended presidential campaign.
In the spirit of keeping the Democratic unity going, Biden also wants to implement Massachusetts Sen. Elizabeth Warren’s idea to immediately cancel $10,000 of student debt for everyone. Warren’s larger plan would have meant student loan forgiveness for about 95% of borrowers.
President Donald Trump halted federal student loan payments and interest for 60 days, starting March 13th. After Trump’s executive action, Congress passed the CARES Act, which extended student loan suspension and 0 percent interest through Sept. 30th, in addition to no wage garnishment for student loan debt collection in that time period. The CARES Act applies to federal loans for undergraduate and graduate school.
Trump is also proposing to cut the Public Service Loan Forgiveness program, which offers student loan cancellation for full-time public service and non-profit employees who make 120 on-time payments over 10 years. Critics of the program’s elimination say that public service and non-profit jobs typically pay less than private sector opportunities and therefore such a move could discourage people from taking on such careers in the first place. Trump seeks to replace that program with an income-based repayment plan that forgives undergraduate federal student loans after 15 years of payments for everyone, not just public service employees.
In short, Biden is offering permanent relief for eligible borrowers and Trump is offering a temporary grace period for a larger swath of borrowers, while also de-incentivizing public service careers.
As lawmakers wrangle with each other on launching a second stimulus package that will also likely include a student loan debt component, impacted voters must take stock of what is in their fiscal best interest.
Are your loans federal or private? Do you have graduate school debt? If you are eligible for the current pause on student loan collection, should you pay anyway if you are able? The answers to these questions will shape how you manage your debt and who you plan to back in the 2020 election.
If you’re unsure of what to do, contact your lender directly to determine your repayment options and seek the advice of a financial expert to figure out what is best for you.
Demetria Irwin is a NYC-based freelance writer and a lover of cute, smart and fabulous things.