According to data, Black borrowers stand to lose the most if the Biden administration’s student loan forgiveness program is overturned by a majority conservative court on February 28, when the administration will argue its case before the US Supreme Court.
A disproportionate amount of student loan debt is held by black borrowers, many of whom are likely Pell Grant recipients—federal aid intended to assist low-income students in paying for their higher education.
Black Students Borrow More For School
Under the administration’s plan, borrowers of federal student loans who also received Pell Grants may be eligible for debt forgiveness of up to $20,000.
According to a Brookings Institution study, Black college graduates typically owe $7,400 more than their white counterparts when they graduate, or $23,400 versus $16,000.
However, within four years of graduation, Black borrowers hold $53,000 in student loan debt, or nearly twice as much as their white counterparts, according to the study. This is because of differences in interest accrual and graduate school borrowing.
The White House stated that the student loan forgiveness program would advance racial equity in its initial justification when it was announced in August.
“Black students are more likely to need to borrow for school and more likely to take out larger loans,” the statement read.
In comparison to their white counterparts, black borrowers are twice as likely to have received Pell Grants. Pell Grants are also more frequently awarded to borrowers of color than to their peers.
A study by the Urban Institute concluded that debt forgiveness initiatives aimed at people who received Pell Grants while attending college will advance racial equity because of this.
One of two lawsuits challenging the Biden administration’s debt relief strategy is based on this justification and is currently before the Supreme Court.
Since the program has been suspended by lower courts, the administration is unable to release debt relief to the 16 million borrowers who have already been granted debt forgiveness by the US Department of Education.
For borrowers making up to $125,000 per year, or up to $250,000 for married couples, the policy would forgive up to $10,000 in federal student debt, with a maximum of $20,000 for Pell Grant recipients. Income levels for the 2020 and 2021 tax years would be taken into consideration, and the program only applies to current borrowers, not future ones. Private student loan holders are not qualified.
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New Student Loan Forgiveness Program Scheme
Meanwhile accounts for delinquent or defaulted student loans totaling $34 billion have been brought into current status thanks to President Biden’s Fresh Start initiative.
Less than 1% of all student debt is now delinquent or in default, according to the New York Federal Reserve’s Q4 2022 Household Debt and Credit report.
The COVID-19 payment pause will end, and the Fresh Start program will continue for a year (currently no later than June 30, 2023). You are qualified to benefit from the following as a borrower:
- Applying for federal student loans, other federal loans, like mortgages (revoked when your student loans went into default)
- Elimination of wage garnishments, Social Security and tax refund withholding, and collection calls
- The potential for future student loan forgiveness (normally, you only get one chance to do so)
- Access to student loan forgiveness programs, income-driven repayment (IDR) plans, and deferment and forbearance options
- Erasing the defaulted account from your credit report
However, in order to take part in the program, you must make a repayment plan during the Fresh Start period. You will be denied access to these benefits if you don’t.
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