Representative Ayanna Pressley (D-MA) lent her voice to the chorus that’s urging the Biden administration to cancel student debt, stressing the impact on Black borrowers.
“Student loan cancellation is a matter of racial and economic justice across our country,” Pressley said during a virtual conference held by the Consumer Federation of America. “Black student borrowers are forced to borrow more than their white peers and are five times more likely to default on a student loan.”
Furthermore, Pressley argued, the disparity was a “result of generations of systemic racism” that prevented Black Americans from building wealth. So cancelling this debt “must be an essential part of a truly equitable economic recovery.”
Pressley, a member of the so-called “Squad” of women elected to the House of Representatives in 2018 that also includes Alexandria Ocasio-Cortez (D-NY), Ilhan Omar (D-MN), and Rashida Tlaib (D-MI), is one of several Democrats pressing the incoming Biden administration to forgive some student loan debt through executive action soon after the President-elect takes office on January 20, 2021.
In Pressley’s home state of Massachusetts, 855,000 borrowers hold about $33 billion in student loan debt as of 2019. Across the country, roughly 43 million Americans hold more than $1.5 trillion in outstanding federally-backed student loans.
“The crisis is really a result … of failed policy choices,” Pressley added during a separate conference at the Center for Responsible Lending on Thursday. “Failed policy that has resulted in the chronic underfunding of our nation’s Historically Black Colleges and Universities, community colleges, and state universities… [who] had to raise tuition in order to cover the skyrocketing cost, forcing Black families to borrow more in order to foot the bill.”
She also recalled the psychological toll of debt collection, sharing her own story of how she felt traumatized as a child by the nonstop calls to her home phone line from collectors.
“A ringing phone was very triggering for me,” she said. “Debt despair is real.”
Private approaches to income-based repayment
Several Historically Black Colleges and Universities (HBCUs) have banded together to create an alternative to the federal income-based repayment program to specifically address the racial student debt gap.
Starting in 2021, the nonprofit Student Freedom Initiative (SFI) will offer STEM majors at participating schools to get on an income-contingent repayment plan after they graduate. SFI will pay for the student upfront and will be paid back by the student after graduation on a monthly basis — based on each borrower’s income — over a maximum of 20 years.
The program is “an alternative to debt accumulation … [and] is very sensitive to their needs, their income levels and so forth,” Florida A&M University (FAMU) President Larry Robinson told Yahoo Finance (video above). FAMU is one of the nine HBCUs participating.
The program aims to help students secure good internships, tutoring, mentoring, to make sure they graduate as early as possible. And the repayments would go back into the program and be used to fund the next cohort of students.
The sensitivity to income is key, Robinson added, because it is “very, very, important that the students are able to pay at a rate that allows them to still grow and develop in their professional lives.”
Aarthi is a reporter for Yahoo Finance. Follow her on Twitter @aarthiswami.
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