Biden's loan forgiveness plan to heavily impact Black borrowers

President Joe Biden's plans to cancel student loans will particularly impact Black Americans, who carry much of the burden of student loan debt.

"The burden is especially heavy on Black and Hispanic borrowers, who on average have less family wealth to pay for it," Biden said in a tweet. "And the pandemic only made things worse."

For those making under $125,000 a year, $10,000 in loans will be erased. For borrowers who received federal Pell grants, which is aid given to undergraduate students who display "exceptional financial need," up to $20,000 in loans could be canceled.

Nearly 45% of borrowers, or 20 million people, will have their debt fully canceled, according to the White House.

For the remaining 55%, a new plan will offer more relaxed terms for loan repayment. This means cutting the amount that borrowers have to pay each month in half, from 10% to 5% of discretionary income, and covering borrower's unpaid monthly interest, among other efforts.

"I just can't underscore what a huge deal this is in millions of borrowers' lives," said Kyra Taylor, an attorney at the National Consumer Law Center.

Impact on people of color

Several racial advocacy groups have cheered Biden's decision as a "step in the right direction."

"Approximately one in four Black Americans have negative net worth — meaning their total debt exceeds their total assets," said the civil rights group National Action Network in a statement. "The administration expects the first $10,000 of debt relief will move over half a million Black Americans from a negative to a positive net worth."

More Black students take out loans than white students: 71% compared to 56%, according to the research organization Education Data Initiative.

Black college graduates owe $25,000 more in student debt on average than white graduates, the Department of Education found. And four years after graduation, 48% of Black students owe an average of 12.5% more than they borrowed, according to the Education Data Initiative.

Black students make up 72% of Pell grant recipients, according to the DOE.

A typical Black borrower will see his or her loan balance cut nearly in half and more than one in four Black borrowers will have their balance forgiven, according to the White House.

Black women, in particular, carry a disproportionate burden of student debt. They hold nearly two-thirds of the nearly $2 trillion outstanding student debt in the U.S., according to data from the Census Bureau.

About half of Latino borrowers will have their entire federal loan debt forgiven thanks to the $10,000 loan cancellation plan, according to higher education research and advocacy group Excelencia in Education.

"Because of racial disparities in intergenerational wealth, Black and Latino students aren't just more likely to need to borrow student loans to go and get an education, but we also know that predatory for-profit colleges that cost more to attend also target Black and Latino populations around the country, which results in many Black and brown borrowers having larger balances," Taylor of National Consumer Law Center said.

Advocates say there's more to do

Following the announcement, some criticized the Biden administration for not doing enough to tackle racial inequities and college affordability, which will continue to impact students and borrowers.

Several critics pointed to the persisting racial wealth gap as a reason to further improve student cancellation for students of color most burdened by economic inequality. In 2019, the Brookings Institute found that the median white household held $188,200 in wealth, which was 7.8 times that of the typical Black household.

The National Action Network has called on Congress to "provide relief by passing legislation to further build upon the president's actions."

"The $125,000 income cap will leave a large amount of the population behind, especially in an era of high inflation," said NAN. "A Black doctor or attorney who earns above the cap could very well have six-figure student debt. Low levels of cancellation might leave already distressed Black borrowers struggling with repayment."

The Council on American-Islamic Relations (CAIR) also spoke out in favor of a larger relief plan.

"President Biden's cancelation of some student debt for certain Americans is a step in the right direction but wholly insufficient to make a serious dent in the student debt crisis and growing racial wealth gap," said CAIR Director of Government Affairs Department Robert S. McCaw in a statement.

He continued, "We call on President Biden to use his executive authority to cancel at least $50,000 in student debt for all borrowers and create interest free federal student loans that will help millions of Americans trapped in compounding interest-based debt that in many cases has become impossible to pay back."