In the early 2000s, I felt fortunate when I received my financial aid package, which opened the doors to the college I aspired to attend. Like many of my peers, I was raised with the belief that obtaining a college degree was essential for securing a “good” job. As a Black woman, the idea of forgoing college was simply not an option. My biggest concern during my senior year was figuring out how to finance my education.
While the narrative around higher education is slowly evolving with the resurgence of vocational schools, many of us who believed in the college dream are now grappling with overwhelming student loan debt. Over 45 million Americans share this burden, and I am among them. If the Biden administration were to forgive the staggering $1.6 trillion in student loan debt, it would empower families like mine to begin building wealth.
Biden is expected to propose a plan that would cancel up to $50,000 in student loans for individuals who attended public colleges and earn less than $125,000. As noted by the Huffington Post, the federal government issues approximately 92% of student loans, while 8% come from private financial institutions. The government profits from the interest on these loans, leading to the pressing question: if student loan debt is canceled, how will the government recover that loss? However, the potential economic benefits of returning this money to borrowers could far outweigh the costs.
An August 2020 report from the Roosevelt Institute indicated that forgiving just $20,000 in student loans could relieve half of all households with student debt. Forgiving $40,000 could eliminate debt for 75% of borrowers. Additionally, this would help address the racial wealth gap that has been exacerbated by student debt. The report highlights that Black borrowers often face higher student debt and struggle more to repay it. For instance, a study showed that twenty years after entering repayment, the median white borrower had repaid 94% of their debt, while the median Black borrower still owed 95%.
Eliminating student loan debt would allow individuals to pay off their mortgages faster, transforming their homes into assets rather than liabilities. A survey by the National Association of Realtors revealed that student debt forces borrowers to delay homeownership by an average of five to seven years. The Chief Economist of the National Association of Realtors, Lawrence Yun, stated that home sales could increase by around 300,000 annually if student debt were not a burden.
The implications of student loan forgiveness extend beyond potential homeowners; they also impact aspiring business owners. Student debt affects access to credit, homeownership, and the ability to start a business, all of which contribute to economic growth.
Moreover, the mental health ramifications of student debt cannot be ignored. The weight of such significant debt often leads to anxiety and stress. Personally, my student loan debt is nearly equivalent to my mortgage, and the thought of cancellation would alleviate much of my anxiety, allowing me to breathe easier. Many families experience similar burdens, with studies indicating connections between debt and mental health issues, including depression and anxiety.
If a substantial portion of student loans were forgiven, it would instill hope for a brighter future. For families like mine, grappling with an extra $300 payment for a degree obtained two decades ago, cancellation would mean more than just financial relief; it would signify a chance to build generational wealth and live life fully rather than being shackled by debt.
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Summary:
In summary, the potential cancellation of student loan debt could significantly relieve financial pressures for millions of Americans, particularly those from marginalized communities. The economic and mental health benefits of such a move would not only empower individuals to build wealth but also stimulate the economy at large. Biden’s anticipated plan to forgive student loans is a crucial step toward healing and prosperity for many families.