Six ways to fix the student debt crisis

Debt to Society
The Case for Bold, Equitable Student Loan Cancellation and Reform Americans believe that every qualified student—regardless of their color, gender, or financial situation—should be able to pursue their educational dreams, and that no one should face massive financial pain simply because they decided to get an education. Yet, the extreme rise in student loan debt has placed unacceptable risk on working-class families and people of color. Our latest, Debt to Society, calls on policymakers to take dramatic action to address our crippling student debt crisis. The report lays out the facts of those most impacted by student debt and provides several policy options that would end the burden of student loan debt for some, and make the system more humane for all who must borrow for an education.
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Selected Findings: 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 percent 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. Among households headed by someone with a bachelor’s degree, the typical white family 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 in 2004, but constitute more than 27 percent of those with $50,000 in debt, and nearly 22 percent of those with over $100,000, 12 years later.

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.
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Policy Solutions: Cancel between $5,000 and $20,000 in debt for all student loan borrowers, which would forgive all debt for the low-balance borrowers most likely to default, while providing some relief to all borrowers. 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 by allowing partial loan forgiveness every few years. Improve and simplify federal loan repayment plans.
Download the full report to read in more detail about these policies — including how they should be written and who they would help.