NEW REPORT FROM DEMOS: Debt to Society: The Case for Bold, Equitable Student Loan Cancellation and Reform

New York – Demos—a dynamic think-and-do tank that champions a just, inclusive, multiracial democracy—released a report today calling on policymakers to take dramatic action to address our crippling student debt crisis. The report lays out several policy options to make student loans less burdensome, more humane, and less complicated.

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No one should face massive financial pain simply because they decided to get an education.

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“Every qualified student—regardless of their color, gender, or financial situation—should be able to pursue their educational dreams,” said report author, Mark Huelsman. “No one should face massive financial pain simply because they decided to get an education. Yet over the past several decades, state and federal policymakers have failed to adequately address the rising cost of college, respond to an increased demand for higher education, or ensure that students’ families have adequate resources to save for the future or deal with unexpected financial emergencies.”

Student loan debt places unacceptable risk on working-class families and people of color. Demos’ report asks and answers how we should recommit to the next generation of college students. The organization also calls on the federal government to consider a comprehensive, equitable policy of student loan cancellation, and provides the following policy options:

• Cancel all debt for some and some debt for all.
• Use funding from a wealth tax to cancel all student debt.
• Forgive a percentage of student loan principal for anyone enrolled in a means-tested public benefit program at least two years post-college.
• Make student loans humane by reforming bankruptcy laws and protecting Social Security from debt collection.
• Improve public service loan forgiveness.
• Improve loan repayment.

Several findings from the report include:

• It is extremely difficult for borrowers of color to pay off their loan debt. The typical white male borrower has paid off 44 percent of his loan balance 12 years after beginning college, while the typical black female borrower has seen her balance grow by an additional 13 percent. Over half of black male borrowers default on a loan within 12 years of beginning school.
• Default is common among older students and borrowers. Nearly half of borrowers who began college between age 24-29 eventually defaulted on a loan. And 37% of borrowers who began college in their 30s or later defaulted on a loan, a rate nearly twice as high as students who enrolled at 18.
• Education seems to pay off handsomely for white families while providing moderate benefits for families of color. The typical white household headed by someone with a bachelor’s degree is sitting on nearly $400,000 of net worth, compared to $68,000 for college-educated black households. White households with a high school education or below have substantially more wealth than black college-educated households.
• Black students are overrepresented among students with $50,000 or more in debt. Black students made up around 14 percent of all students entering college, but constitute more than 27 percent of those with $50,000 in debt, and nearly 22 percent of those with over $100,000.
• Income-driven student loan repayment is a useful tool, but focusing solely on income as a way to measure financial health is problematic. Middle-income white households, for example, have 4 times the financial assets of black middle-income households, and nearly 9 times the financial assets of Latinx households. And among middle-income households that report having debt of any kind, less than 6 percent of white households report being 2 months late on a loan, compared to over 16 percent of black households and 10 percent of Latinx households.

“There is a path toward student debt relief that is race-forward and transformative, and a way to restructure the system such that anyone with debt would be considerably better off than they are under the current confusing, punitive regime,” said Huelsman.

Read the full report
 

Demos is a dynamic think-and-do tank that powers the movement for a just, inclusive, multiracial democracy. Through cutting-edge policy research, inspiring litigation, and deep relationships with grassroots organizations, Demos champions solutions that will create a democracy and economy rooted in racial equity.