Dominique Baker: Biden's student debt plan extends much-needed relief to Black borrowers

When approximately 10,000 student loan borrowers had their private student loans randomly canceled from 2010 to 2017, researchers found that it ultimately enabled them to more easily move, change jobs and earn more money. The borrowers were also 11% less likely to default on credit cards or other loans.

I expect similar outcomes will flow from the Biden administration’s decision to cancel federal student loans. And the decision to cancel up to $20,000 for those who received Pell Grants means even more relief may flow to borrowers who are Black.

From the standpoint of racial justice, I believe this additional relief for Black borrowers is necessary because of centuries of systemic inequities. Such inequities include accumulating education debt through “predatory inclusion,” a practice in which Black people are offered access to things such as college or buying a house but on exploitative financial terms that have long-term negative effects.

Black student loan borrowers are also often the most burdened by student loan debt. As one example, Black bachelor’s degree earners are more likely to default on their student loans than white students who earn a bachelor’s degree -- 21% versus 4%, respectively. Even more startling, Black bachelor’s degree recipients default at a higher rate than white students who leave college with no degree – 21% versus 18%, respectively.

The Biden administration also has proposed changes to the income-driven repayment plan, which should help future undergraduate borrowers by reducing the monthly percentage of discretionary income borrowers would pay from 10% to 5% and increasing what counts as nondiscretionary income. That means borrowers will have more money that will not be used to calculate the percentage they owe each month.

I’d argue more work is still to be done to create an affordable college education. But Biden's program was an excellent start.