According to the Center for Responsible Lending (CRL), 70% of the people who graduated from college in 2016 have student loan debt with an average of $30,000 — and the problem gets worse for communities of color, says Ashley Harrington, federal advocacy director at the Center for Responsible Lending.
“We definitely think we have to do something about this crisis,” Harrington told Yahoo Finance’s YFi PM.
She notes that within communities of color, the black student debt crisis is a significant problem.
“We’re seeing student debt not just being a problem for everyone, but also exacerbating the racial wealth gap. So we think there has to be a way to make college more affordable.”
The CRL supports and advocates for debt-free college, but even if that were to become a reality, Harrington points out that there are 44 million people who would still have outstanding federal student loan debt, with the amount of outstanding federal student loans currently at $1.6 trillion.
The CRL recently conducted a study with the NAACP, the National Urban League, and the Leadership Conference on Civil and Human Rights. The group’s findings showed that even if $10,000 of student debt were canceled for each debtor, it would have a major impact on the loan crisis.
“Most of the people who are in default right now are in default for less than $10,000, and these are former Pell students. These are low-income students, and that’s where the heart of the crisis is. So even if you didn’t do full cancellation, even if you just did $10,000 across the board, you would have a tremendous impact on the people that we’re most worried about and that are struggling most in this crisis.”
In the interim, Harrington and the CRL believe that there needs to be a more streamlined income-based repayment system that makes monthly payments more affordable.
“There are five income-based repayment plans. We need to be down to one. It’s very complicated. It’s complicated for the borrower. It’s complicated for the service, or it’s complicated for the Department of Education. So let’s make it easier for everyone, let’s have one repayment plan,” Harrington says.
“Let’s make it actually affordable and make it based on 8% of your income versus a 10% to even 15% where it is now, depending on what payment plan you’re in. Let’s make it 15 years. These plans right now are 20 to 25 years. That’s a mortgage that’s not student debt.”
Reggie Wade is a writer for Yahoo Finance. Follow him on Twitter at @ReggieWade.