- REUTERS/Jason Reed
- Bernie Sanders and Elizabeth Warren have both said eliminating student debt would help black families attain more wealth.
- Currently, black college grads from four-year schools take on $7,400 more in loans than their white peers.
- A 2018 analysis by the Roosevelt Institute found that white families have 12 times the amount of wealth as black families. Eliminating student debt could narrow that gap.
- Visit Business Insider’s homepage for more stories.
The US might need to look to the student-debt crisis to address racial inequality.
Americans are currently saddled with $1.5 trillion worth of student-loan debt, and the total amount of debt young people owe is the highest since immediately before the 2008 financial crisis.
Democratic presidential contenders Bernie Sanders and Elizabeth Warren both released plans that would eliminate the debt entirely. Their campaigns have said canceling student debt would help black and brown families much more than white ones.
The crisis has hit minority communities worse than white families on average. Black graduates default on their loans (meaning they do not make a payment within 270 days) at five times the rate of white graduates, and graduates from historically black colleges have 32% more debt than other students.
While black household wealth has long been lower than that of white families, canceling student debt could narrow the divide. An analysis by the Roosevelt Institute, a liberal think tank based in New York, found that white households headed by people between the ages of 25 and 40 have 12 times the amount of wealth on average than black households.
Yet without student debt, the ratio shrinks to just five times the amount of wealth – although as this chart shows, it still remains quite wide:
“Canceling student debt for black households matters more for their net worth than for white households,” Marshall Steinbaum, one of the study’s authors, said in an interview with Business Insider.
Steinbaum used data from the Survey of Consumer Finances, which is conducted by the Federal Reserve. The study focused on the median wealth of households headed by black and white people aged 25 to 40.
Currently, black college grads from four-year schools take on $7,400 more in loans than white students. Black workers take on higher debt in part due to discrimination in the workplace, Steinbaum said. Black college graduates are more likely to face discrimination, which includes “being treated unfairly in hiring, pay, or promotion,” than those without degrees, according to the Pew Research Center.
Because of the larger amount of student debt taken on, even black college grads working high-paying jobs have an average net worth that’s much lower than white families. Canceling student debt, therefore, could bring the median net worth between the two demographics much closer.