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Forty-five million Americans have student debt, and President Biden has promised to do something about that. He's proposed cancelling up to $10,000 per borrower. Democrats in Congress are pushing for more, though - $50,000 per person. Here's NPR's Elissa Nadworny.
ELISSA NADWORNY, BYLINE: Joe Biden has made it clear $1.6 trillion in federal student debt is a problem. But the question of how much of it to cancel is still on the table. Let's take a look at the plan the president supports, canceling $10,000 in debt per borrower.
ADAM LOONEY: Borrowers who have the lowest student debts are the ones who struggle the most.
NADWORNY: Adam Looney is an economist at the University of Utah. He says not all debt is the same. Borrowers who completed a bachelors often have higher debt burdens but are able to pay that debt back. The ones really struggling are the ones in default. When you're in default, the government can take your tax refund or part of your paycheck. When you get older, you can even lose part of your Social Security. Roughly 8 million borrowers are in default, and most of them have less than $10,000 in debt.
LOONEY: The amount that you borrow is largely dependent on how many years you enroll. Often, students who drop out after a semester or a year or two just don't accumulate very much debt.
NADWORNY: If you never got that degree, you can't get a job to help pay off that debt. Looney argues that anything higher than 10,000 in cancellation runs the risk of rewarding borrowers who don't need help. He points to research that shows 36% of student debt is owned by the top 20% of income holders. But income is different than wealth. Households with student debt tend to have the least amount of wealth. That's the value of all your assets minus debt. Now let's take a look at the plans to cancel $50,000 dollars in student debt. Senators Elizabeth Warren and Chuck Schumer are among those behind this idea. They say a more forgiving cancellation policy is also about racial justice and would target gaps in wealth, especially among Black families. Black households are more likely to have student debt and more of it than white or Latino families.
ASHLEY HARRINGTON: The student debt crisis - it is disproportionately impacting borrowers of color and communities of color, Black borrowers in particular.
NADWORNY: Ashley Harrington is the senior policy counsel at the Center for Responsible Lending.
HARRINGTON: So when we talk about cancelation, we have to start there.
NADWORNY: Black borrowers, she says, can struggle even if they get their degree thanks to racism in the labor market. More debt cancellation would give them a leg up.
HARRINGTON: You have families, borrowers of color who have never been able to build wealth. They don't have intergenerational wealth. Instead, they're having intergenerational debt.
NADWORNY: Many Black and Latino families missed out on ways to build wealth in the past, like homeownership and job training programs, due to racist policies. Researchers who study and talk to student loan borrowers say now student loan debt is the thing that's holding them back. In a forthcoming report, the Center for Responsible Lending found Black borrowers who would have all of their debts erased if $50,000 was forgiven have median assets worth just $76,000 dollars. In most cities, that's not even a house. And, of course, there's the pandemic.
HARRINGTON: We are in the midst of a crisis. And so we're just at a place where $10,000 isn't going to cut it.
NADWORNY: Regardless of the dollar figure, most advocates for canceling say the thing that makes it so appealing is it can be done by the president through executive action without Congress. President Biden has long said he'd prefer to use legislation. But in early February, the White House signaled it was willing to consider doing it with the flick of a pen.
Elissa Nadworny, NPR News.
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