I considered myself lucky back in early 2000 when I received my financial aid package, allowing me to attend the college of my dreams. Like so many of my peers, I believed in the promise instilled in me in high school that a college degree is the only way one could secure a “good” job. For me, as a Black woman to boot, not going to college wasn’t an option. The question I wrestled with my senior year of high school was: how would I pay for such a degree?
While the “everyone needs a college degree” narrative seems to be changing slightly as vocational schools make a bit of a resurgence, many of us who drank a different flavor Kool-Aid are now paying the price in the form of massive student loan debt. According to CNN, over 45 million Americans have student loan debt. I am one of them. If the Biden administration were to cancel the $1.6 trillion student loan debts of millions of Americans, it would mean that folks like my family could begin to build wealth.
The bill that Biden is likely to introduce will forgive up to $50,000 of the student loans of those who attended public colleges and make less than $125,000. According to the Huffington Post, “Approximately 92% of student loans are issued by the federal government, while the remaining 8% are funded by private financial institutions like banks and credit unions.”
The federal government certainly holds a piece of the student loan debt pie. When interest is paid on student loan debt, the government collects revenue. If student loan debt is canceled, where will that money come from? That is the million-dollar question: how will that deficit be made up — and is it even worth being made up, if putting that money back into our pockets can give back so much to our struggling economy? The Biden administration wants to heal America, and this is one way to get us there.
An August 2020 report by the Roosevelt Institute showed that just $20,000 in student loan forgiveness would mean that half of all households with student loans would be free of debt. Forgiving $40,000 would eradicate student loan debt for 75% of borrowers.
Moreover, it would lessen racial disparities that cannot be ignored. “Student debt, as federal policy, has reproduced and exacerbated the Black/white racial wealth gap and economic inequality,” the report says. It goes on to explain that “Black students are yoked with higher student debt and less ability to repay it,” and that gap continues to widen with time. A 2019 study by the Institute on Assets and Social Policy found that “20 years after entering repayment, the median white student borrower has paid back 94 percent of their student debt. The median Black borrower, meanwhile, still owes 95 percent of their student loans.”
The cancellation of student loan debt would mean that people would be able to pay down their mortgages faster, making their homes an asset rather than a liability sooner than their fixed 30-year mortgage loan says. It would help to position those who, as a result of high student loan payments, cannot afford a down payment for their home, the ability to save for such a purchase. A survey by the National Association of Realtors found that because of student loan debt, the average borrower delays home ownership by five to seven years. “Home sales could be, say, 300,000 higher annually if people were not saddled with large student debt,” Lawrence Yun, the National Association of Realtors’ Chief Economist, told NPR.
It isn’t just potential homeowners that would benefit, but potential business owners too. “Having student loan debt affects whether a person can access other forms of household credit, including whether they can save for a down payment on a home, qualify for a mortgage or start a small business — all of which drive economic growth and wealth creation,” notes Harmeet Kaur for CNN.
Canceling student loan debt would mean that we could truly invest in our society. With one less financial commitment, people would be able to put funds toward helping others. It would mean that those who wanted to give philanthropically but could not afford to do so now could.
While all this is important, we can’t forget the impact it would also have on the mental health of borrowers. I know that carrying around such a massive debt means I also carry around anxiety. The mountain of debt sometimes seems unbearable — too large to tackle in my lifetime. My student loan debt is nearly as much as my mortgage. With canceled debt, I’d be able to breathe a little easier, my anxiety would lessen, and my worry would dissipate.
And I’m not alone in this; the mental and emotional load placed on many families would be a thing of the past, lessening debt-related anxiety and depression. A study conducted by the National Library of Medicine found that “Individuals with depression and anxiety were three times more likely to be in debt. Other studies have even found a link between debt and suicide.” For some, the burden can be too heavy to carry, and the struggle to carry it is often done with a boatload of shame attached to it.
If a large portion of student loans were forgiven, it would provide families with the hope that brighter days are indeed to come. I hope we can believe the Biden administration, who told us on the campaign trail that “our best days still lie ahead.” For families like mine, burdened with an additional $300 payment each month for a degree I received 20 years ago, it would mean more than one less payment to make every month. It would mean we could begin to build generational wealth for our kids, and we could have money in our pockets to truly live before we die paying off student loan debt.
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