PHILADELPHIA (KYW Newsradio) — President Joe Biden’s loan forgiveness program sounds like a big win for everyone with student debt, but some experts say people of color are not getting the relief they may think they are getting. It all comes down to this: People who have less, borrow more, and thus will owe more.
African American student loan debt on average is $50,000 or higher, compared to $20,000 to 30,000 for their white counterparts. Biden’s plan forgives $10,000 for individuals making less than $125,000 or households making less than $250,000, with an additional $10,000 for Pell Grant recipients.
“We’re going to see people have a fresh clean slate. Mostly men, white men. I hate to say it that way, but that’s what the numbers show as far as who is going to have a win with this,” said Sonia Lewis, CEO of the Student Loan Doctor in Philadelphia.
National statistics show there are over 13 million Americans who owe less than $20,000 in student loan debt. Biden’s student loan forgiveness plan is a big score for them.
Lewis says the minority threshold of debt is much higher. “It doesn’t really move the needle when we talk about how much money can be applied, we’re really only going to see it lowered probably $100 or $150 dollars on the payment itself on the overall debt,” she added.
Related
Sean Vereen is president and CEO of Steppingstone Scholars, which will soon merge with Philadelphia Futures, a nonprofit that helps first-generation college students. He says overall costs need to come down and the loan system needs work.
"The loan system is not wrong, but a system where you have a significant number of folks who will owe more over time, is not a good system," Vereen said.
Vereen added that more grants are needed, and tuition costs have to come down, estimating "66% of Black borrowers, after paying for 13 years, owe more than they did on the original loans that they took out when they were in school.”
Related
Both Lewis and Vereen agree that the restriction on future payments on college loans dropping to no more than 5% of a borrower’s discretionary income, down from the current 10% and 15%, can help with building long-term wealth.
They’re also concerned about the application process. The majority will have to apply, but a small minority won’t have to.
According to a White House fact sheet, “The Department of Education will work quickly and efficiently to set up a simple application process for borrowers to claim relief. The application will be available no later than when the pause on federal student loan repayments terminates at the end of the year. Nearly 8 million borrowers may be eligible to receive relief automatically because their relevant income data is already available to the Department.”
Related
