A new study argues that student debt forgiveness would be a step forward for narrowing the racial wealth equality gap.
A joint study between the think tank Demos and the Institute for Assets & Social Policy at Brandeis University claims that, if higher education policy were crafted correctly, wealth disparity between black and white families could fall by 37 percent for households earning less than $50,000, according to The Washington Post.
Recommended Stories
“The authors of the study say targeting any sort of debt relief to people making at or below the national median household income would have the greatest impact on racial wealth inequality,” the Post wrote.
However, how that policy gets implemented matters.
“Providing debt relief to all households regardless of income would actually increase the racial wealth gap among young adults, as white households would reap greater benefits because of their higher rate of college completion and graduate degrees,” the Post noted.
That problem echoes a divide among Democrats on free college. During the Democratic presidential debates, Hillary Clinton opposed Bernie Sanders proposal of free college because it would require taxpayers to fund college for rich families as well as poor.
Forgiving student debt, or offering free college, would help black students avoid student loan debt, but without means testing it, inequality would increase. Black households, Demos noted in their study, are “far more likely to have student debt than their white peers.”
The study also criticizes the reputation of higher education as a leveling force for equality.
“Despite its reputation as a Great Equalizer, our current system of higher education in the U.S. has served to reinforce many of the racial disparities that we see in other areas of social and economic policy. While high school graduation and college enrollment have increased among students of all racial and ethnic groups, and the differences have narrowed slightly, the gap in college completion between white students and their Black counterparts is far more substantial and has actually risen over time,” the authors write.
Additionally, black students are more likely to have debt, but have lower graduation rates.
Implementing a progressive policy to reduce the racial disparity, however, “would be an uphill battle,” the Post noted. Policies that focus on low-income students are more popular than ones along racial lines. Additionally, forgiving that debt could create a precedent that encourages students to take out more loans because they assume the government will forgive them.
For black students who graduate, median income is twice as high as those who don’t. The higher education system, however, has struggled to bring black graduation rates to similar levels of white graduates. Structural reforms could do more than forgiving student loan debt, as well as alternatives to a traditional four-year degree. Young people who are students are traditionally in a better financial standing than non-students, so forgiving student debt could still benefit the well off at the expense of their peers, and forgiving that debt would transfer to taxpayers, students and non-students alike.
