Student Debt Forgiveness Options: Implications for Policy and Racial Equity

August 14, 2020

The continued rise in student debt has had disproportionate negative effects for Black borrowers. Plans proposing student debt forgiveness should foreground the potential impact on those worst affected. We use data from the 2016 Survey of Consumer Finances to model the impact of debt forgiveness at multiple levels of cutoffs on borrowers’ loan obligations and for the racial wealth gap.


With cumulative U.S. student debt now topping $1.67 trillion, there is growing consensus that funding higher education through individual debt is an unsustainable practice. Student debt is weighing down multiple generations of Americans. Millions of students enroll in higher education each year in pursuit of enhanced economic stability, but leave college with a debt load that takes decades to repay—if it is repaid at all. Even before the current economic crisis, the shifting demographics of college attendance, rising tuition costs, and stagnant earnings have required revisiting assumptions that virtually any amount of debt is worth it over the long term. Recent research has shown the disproportionate and lasting burden of student debt on Black households. Moreover, the growing debt burden falling on marginalized groups raises concerns that student debt is becoming a racialized means of financial exploitation via “predatory inclusion.”

The forty-year experiment in devolving the cost of higher education to individuals has caused specific and avoidable harms that can be partly remedied through extensive debt forgiveness. Using data from the Survey of Consumer Finances, we propose simulations of student debt forgiveness to determine the impact of various student debt forgiveness policies of up to $50,000 on household wealth levels. We focus specifically on the impact of forgiveness policies on vulnerable borrowers with negative net worth and on the racial wealth gap analyzing impacts for Black and white households. As a primary policy focus, we aim to identify debt forgiveness levels that maximize benefit to households (in terms of overall reach and proportion of vulnerable households affected), while promoting racial equity.

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