Who student debt relief helps (and it's not who you think)
Despite what critics may say, student loan debtors who stand to benefit most from the relief plan announced last week aren't exactly latte-sipping elites.
Reality check: First, nearly 90% of those benefiting from the policy earn less than $75,000, according to the White House. Second, a significant percentage of student loan debtors didn't get a four-year degree. That means they also don't get the income boost of a bachelor's degree.
- "Many Americans understandably, but mistakenly, assume that the vast majority of student loan debtors have 4-year degrees, when in fact about half do not," said Aaron Sojourner, a labor economist at the Upjohn Institute.
Details: Sojourner looked at data for those who borrowed money and started college in 2011. He found that after six years, a majority didn't have a bachelor's:
- 34% hadn't attained a degree; 11% graduated from a two-year program; and 10% received a professional certificate, like from a trade school.
- His data is in line with the White House estimates that nearly one-third of borrowers have debt but no degree.
“You are ensuring that your little brothers and sisters have what they need for school,” Gabrielle Perry, a 29-year-old African American woman told the AP. “You are helping your parents pay off their rent, their house. So your quote-unquote wealth doesn’t even have time to be built because you’re trying to help your family survive.”
- In fact, Black borrowers are disproportionately burdened by student loan debt. A typical Black borrower will still owe 95% of their student loan 20 years after starting college, compared to 6% for a white borrower, according to a 2019 analysis.
Of note: Women hold two-thirds of the student loan debt in the U.S., according to a widely cited estimate from the American Association of University Women (AAUW)— with Black women holding the most.
- This is because women earn less than men overall, and so take longer to pay back their loans. Often, childcare costs add to the financial pressure.
- This means a narrower band of economic opportunity for women, who are less able to build wealth, burdened by debt. "Women shouldn't have to sacrifice their financial future just to get an education," said Gloria Blackwell, CEO of the AAUW.
Yes, but: Of course, those who didn't go to college at all are still left out of this plan, and don't stand to benefit at all.
Bottom line: The two-plus years of the student loan moratorium did benefit a lot of higher-income folks, but the policy announced last week by the Biden administration will mainly serve those who could use the help.