Canceling student debt 'a racial justice issue,’ would ‘stimulate the economy’: Is Rep. Jayapal right?
- Rep. Pramila Jayapal called for the cancellation of student loan debt asserting it as “a racial justice issue” while arguing that it would “stimulate the economy” rather than increase inflation per the Committee for a Responsible Budget (CFRB).
- On April 6, 2022, President Biden announced another pause on federal student loan repayments until the end of August to “assist borrowers in achieving greater financial security.” Biden had initially prolonged the student loan payment grace period an additional 90 days through May 1, 2022.
- Former President Trump first granted student loan relief in March 2020 during the first spikes of the pandemic, then extending it to October, and again in December. Before leaving office, he extended deferment until January 31, 2021.
- According to Forbes, there are 43 million Americans who owe a combined total of $1.6 trillion in student loan debt as of April 2022. Younger borrowers between the ages of 25 and 34 hold the majority of debt, about $500 billion in federal student loans.
- The Brookings Institution found that the average Black college graduate owed $52,726 compared to $28,006 for the average White graduate.
Canceling student debt is simple economics; those forced to pay large amounts every month would have more money in their budgets to spend. Having a larger monthly budget would lead to more consumer confidence and greater consumer spending, which is the bedrock of our economy. Currently, this extra cash could be critical as fuel prices have gone through the roof. Further, it would allow many people to save for a deposit and eventually buy their own homes instead of delaying what is known to be one of the best ways to generate generational wealth. This is especially critical for racial minorities, who have seen lower rates of generational wealth and homeownership in America.
Student debt hits racial minorities the hardest. Four years after graduation, nearly half of black borrowers owe 12.5% more than they borrowed due to outrageous interest rates baked into student loan plans and, on average, owe $25,000 more than their white counterparts. Also, nearly 30% of African American graduates make payments of more than $350. Forgiving student debt would significantly level the playing field for these groups.
Those opposing debt forgiveness claim that doing so is too expensive and will add to already soaring inflation. Inflation is a real problem but needs to be addressed through other means. Further, these individuals often claim that forgiveness is an unwise investment, as though educational debts are a zero-sum expense. We get a more thoroughly trained workforce and a more highly educated populace by investing in education. Seeing these benefits in combination with the economic stimulus caused by increased consumer spending, it's hard to imagine a better investment for the nation.
Vying for the title of the farthest Left member of Congress, Representative Pramila Jayapal recently called for the cancellation of all outstanding student debt while arguing it is a 'racial justice issue.' Student debt has nothing to do with racial justice. Students of all races can accumulate and currently have student debt. Canceling student debt would be extremely unfair to those who diligently repaid their student loans and families who took on the repayment of these loans, making sacrifices along the way to do that.
Pramila further stated that cancellation would stimulate the economy. She didn't say that if student loans are 'canceled,' somebody still has to pay—and that shift of responsibility falls on the American taxpayer. Why should those who repaid their loans or skipped college altogether to join the workforce instead subsidize others' college degrees? According to the Committee for a Responsible Budget (CFRB), it would cost the federal government $1.6 trillion to cancel student loan debt. Additionally, according to the CFRB, it would increase inflation. Presently, the economy is unable to meet existing demand due to supply chain problems and other factors.
According to a study by JP Morgan Chase, a disproportionate amount of student loan debt forgiveness would go to middle or high-income households. If Rep. Jayapal argues that racial minorities are disproportionately in the lower-income strata, then her argument about 'racial justice' does not hold up against the JP Morgan Chase analysis.
Even the discussion of canceling all student debt has created a moral hazard. In other words, it has encouraged college students to take on more student loan debt than they might have otherwise done because they are under the not-unreasonable belief that they will never have to pay it back.