March 04, 2021

At Banking Hearing, Experts Confirm to Senator Warren that Cancelling Up to $50,000 in Student Debt Would Help Narrow the Racial Wealth Gap and Stimulate the Economy

Dr. Darrick Hamilton: $10,000 in Cancellation is Insufficient to Help Most Borrowers

Washington, DC - In a Senate Banking Committee hearing today, United States Senator Elizabeth Warren (D-Mass.) and expert witnesses on debt and racial equity countered arguments that student loan cancellation would primarily benefit wealthy elites and reinforced the case that student loan cancellation is the single most effective executive action available to get our economy going and narrow the racial wealth gap. 

Countering claims that loan cancellation would primarily benefit wealthier people who attend elite schools, Professor Abbye Atkinson, Assistant Professor at UC Berkeley Law School, pointed out that people who attend Ivy League Schools, for instance, are only a small subset of the borrowers and are less likely to graduate with debt. At Alabama State University, by contrast, she noted that 89% of students leave with an average of $54,000 in student debt - including some students who leave without a degree. 

In response to Senator Warren, Dr. Darrick Hamilton, Founding Director at The New School’s Institute on Race and Political Economy, confirmed that cancelling $10,000 of student loans is not enough and that $50,000 is “a lot better.” He noted that the average Black graduate holds about $50,000 in student loan debt four years after graduation, compared to about $30,000 in debt for the average white graduate. Dr. Hamilton further stated that this is a “moral justice issue,” pointing to low homeownership rates and racial disparities in assets among millennials, as well as seniors who are saddled with debt. 

Last month, Senators Warren and Schumer reintroduced a resolution outlining a bold plan for President Biden to tackle the student loan debt crisis by using existing authority under the Higher Education Act to cancel up to $50,000 in student loan debt for Federal student loan borrowers.

Transcript: Wall Street vs. Workers: How the Financial System Hurts Workers and Widens the Racial Wealth Gap
U.S. Senate Committee on Banking, Housing and Urban Affairs
Thursday, March 4, 2021
Senator Elizabeth Warren: So, thank you very much, Mr. Chairman. And I’m grateful that you’ve brought us together today to talk about the racial wealth gap with these leading experts.
Professor Atkinson, welcome. I am so happy to see you here. You have written about all kinds of consumer debt, but today I want to talk about student loan debt. About 43 million Americans now carry one and a half trillion dollars in student loans -- that’s more than Americans owe in auto loans or credit card loans. 

And that burden of debt is stopping people from buying homes or starting businesses. It’s holding our whole economy back. 

So, I want to ask you about who these student borrowers are. Some people have argued that people with student loans are lawyers and doctors who took out debt to go to fancy schools. Professor Atkinson, is that an accurate picture of who has student loans? 

Professor Abbye Atkinson: Good morning, Senator Warren. It is not an accurate picture. If anything, if we think about fancy schools, and I'll insert here, the Ivy League schools, to you know, as examples of fancy schools, debt loans are among the smallest among those graduates from those schools. And some of it has to do with those schools have the resources to support students. Right. They don’t-- or else they enroll students who themselves have resources. So, instead, you know, some of the schools that tend to have, you know, the highest level of debt are regional schools. For example, one school, particularly-- I have a set of notes here just to think about this question. You know, Alabama State University. 89% of students leave with an average of $54,000 in student debt. And I want to focus on the word "leave." It doesn't mean that they leave with a degree. Like, they leave. And so, you know, I think it runs the gambit of community college students, for-profit students, traditional four-year college students -- students who are just, you know, believing what we told them that if you go out and get an education, your life could be better, and what they get instead is debt.  

Senator Warren: Thank you so much. That's very powerful. 
You know, cancelling student loan debt would expand opportunities for millions of people and would provide a massive stimulus for our economy. It is also a racial justice issue. 

Dr. Hamilton, you’ve written that cancelling student loan debt is, I think my quote here is, “one of the quickest actions the president could take” to narrow the racial wealth gap. So can you tell us, how student loan debt cancellation would help level the playing field, and whether or not cancelling $10,000 of student loans is enough to accomplish that goal? 
Dr. Darrick Hamilton: Yeah. I mean. First, I hope that Congress acts to cancel student loan debt but part of the reasons why it's one of the quickest actions is because I think the president could do it through executive action as well. 
But in the context, maybe we could talk about millennials. During the last Great Recession, we asked millennials to wait out a struggling job market and go to school to better themselves, get better credentials. And they came out with record levels of debt. If we look at millennials when they were 30 years old in the context of previous generations, they have the lowest homeownership rate as any other generation dating all the way back to the Greatest Generation that was coming out of the Great Depression. And what's more: the racial disparities in homeownership amongst millennials is as large as it's ever been since we've ever been recording the data. So, on the one hand it's immoral when we tell people this is your pathway for upward mobility, then we saddle them with debt that limits their capacities to get other forms of assets so they can accumulate wealth. So, prospectively, we're looking at a generation that came out of the Great Recession, and now we're about to scar them with this pandemic recession.  So, we certainly need government to act to change their reality. And it's not just millennials. We have people collecting social security that are still paying student debt. So, this is a moral justice issue that has disparate racial effects, and in the 21st century, it's sad that we're still talking about financing a debt free college education for all Americans.

Senator Warren: Well, as you know, Leader Schumer and I have a plan to cancel $50,000 in student loan debt. So, let me just ask you, how much progress would that make in helping close the racial wealth gap in America? 

Dr. Hamilton: Yeah, I mean, I'm for full cancellation, but if the practical reality is 50, it's a lot better than 10,000, especially when we consider the fact that on average, four years after graduation, a Black graduate has about $50,000 in debt in relation to 30,000 for white graduates which is also entirely, intolerably too high.

Senator Warren: Yeah. Well, thank you very much. You know, cancelling $50,000 of student debt is the single most effective executive action available to get our economy going and to make progress toward closing the racial wealth gap. And I hope President Biden decides to do this.
Thank you both so much for being with us today. Thank you, Mr. Chairman.