I felt fortunate back in the early 2000s when I received my financial aid package, enabling me to pursue my dream college. Like many of my classmates, I held onto the belief instilled during high school that a college degree was essential for landing a “good” job. As a Black woman, the idea of not attending college was simply not an option. The real challenge I faced during my senior year was figuring out how to fund my education.
While the dominant narrative around college degrees is slowly shifting with the resurgence of vocational schools, many of us who bought into the previous expectations are now grappling with overwhelming student loan debt. Reports indicate that over 45 million Americans carry this burden, and I’m one of them. If the Biden administration were to wipe out the $1.6 trillion in student loan debt for millions of Americans, families like mine could finally start building wealth.
The proposed bill from Biden could forgive up to $50,000 of student loans for individuals who attended public colleges and earn less than $125,000. Notably, about 92% of student loans are backed by the federal government, while the remaining 8% come from private financial institutions. The government does play a significant role in this debt scenario; it collects revenue from the interest on these loans. The pressing question is: if student loan debt is canceled, how will the government compensate for the lost revenue? Is it worth recouping that money if it means placing more financial freedom back into the hands of struggling citizens and stimulating our economy?
According to a report by the Roosevelt Institute, forgiving just $20,000 in student loan debt would free half of all households from their loans. Increasing that forgiveness to $40,000 would eliminate debt for 75% of borrowers. This action could also help address racial disparities that have only grown over time. The report highlights how federal student loan policies have perpetuated the racial wealth gap, noting that Black students often graduate with higher debt and lower repayment capabilities. A study found that 20 years after entering repayment, the median white student has paid off 94% of their debt, while the median Black borrower still owes 95%.
Canceling student loan debt could accelerate mortgage repayments, allowing homes to become assets rather than liabilities sooner. It would also enable those burdened by student loans to save for down payments. A National Association of Realtors survey found that borrowers delay homeownership by five to seven years due to student debt. Chief Economist Lawrence Yun noted that home sales could increase significantly if individuals were not weighed down by large debts.
The benefits extend beyond potential homeowners to aspiring entrepreneurs. Student loan debt limits access to household credit, making it harder for people to save for homes, qualify for mortgages, or start businesses, all of which contribute to economic growth.
Additionally, the mental health implications of carrying such debt are significant. The anxiety associated with overwhelming student loans can feel insurmountable. My own debt is nearly equal to my mortgage. With debt cancellation, I could experience relief, and the pervasive stress affecting many families could diminish. Studies link debt with heightened rates of anxiety and depression, further illustrating the burden many carry.
Forgiving a substantial portion of student loans could instill hope for families. For those of us still paying off degrees from decades ago, relief from monthly payments would mean the opportunity to build generational wealth and truly enjoy our lives instead of drowning in debt.
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Summary:
The call for student loan debt cancellation is stronger than ever, as many Americans struggle under the weight of repayments. The Biden administration’s potential plan could provide significant relief, enabling families to build wealth and alleviate financial stress. With the added benefits of addressing racial disparities and improving mental health, the time to act is now.
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