Student loans exacerbate the racial inequalities they were invented to solve
- “The Debt Trap” explains how President Johnson believed student loans would tackle racial inequality.
- Johnson’s higher education law was part of his “war on poverty,” but student loans took a different course.
- Today, communities of color bear a disproportionate burden of student debt.
More than likely any other president, President Lyndon B. Johnson was known for his “war on poverty,” but a new book explains how his crusade led to the creation of student debt – and deepening racial inequalities, the exact problem Johnson was trying to fix. Today, student loan debt hurts black Americans much more than whites.
Josh Mitchell of the Wall Street Journal has been covering student loans for years, and his new book “The Debt Trap” details the rise of the student loan system. Much of it started with Johnson’s vision to create a fair way for everyone to go to college and reduce poverty.
In his 1964 State of the Union address, Johnson outlined a series of policies aimed at tackling the national poverty rate of 19% at the time. In the decade since the introduction of these policies, the poverty rate has been nearly halved to 11.1 percent, according to census data, and has remained between that rate and 15 percent ever since. more recently at 10.5% in 2019.
Poverty rates for black Americans, however, have been much higher than for the general population, although they have declined steadily over the past several decades, from about 42 percent in 1966 to just under. 19% in 2019.
This war on poverty encompassed higher education, which “is no longer a luxury but a necessity,” Johnson told Congress in January 1965. He said expanding the role of government in higher education would also be effective poverty reduction.
“The administration assumed that everyone would come out of college with a degree, land a well-paying job, and pay off debt easily,” Mitchell writes.
Johnson needed banks to make loans to anyone who needed them to meet his goal of universal access to higher education, and he believed he did so with the passage of the Higher Education Act of 1965, which provided for scholarships for the poor and guaranteed loans for the middle class.
Soon after the law was passed, however, banks began to raise interest rates on student loans, and the system benefited lenders at the expense of increasing debt and default. more borrowers. Mitchell points out that the company founded by Congress in 1973, Sallie Mae, prioritizes “huge profits” over loans to borrowers, “often leaving borrowers behind.” Now known as Navient, the company has come under fire from lawmakers, including Senator Elizabeth Warren, who denounced her CEO for abuse during a congressional hearing earlier this year.
Johnson believed his student loan program would address racial and income inequalities by increasing the ability of every American to access higher education, but today the burden of student debt falls disproportionately on black borrowers, contrary to what Johnson wanted.
In April, Insider reported that 36 civil rights organizations published civil rights principles detailing the benefits that canceling student debt would have for black borrowers. Organizations, including the NAACP, wrote that black borrowers typically owe 50% more student debt than white borrowers, and four years later, black borrowers owe 100% more.
President Joe Biden’s administration is aware of this. HUD secretary Marcia Fudge, a black woman, told Axios in June that the poor and people of color hold the most student debt, needing reform.
“Who has student debt? The poor, the blacks, the browns,” Fudge said. “We are the people who carry the most debt. And so the system is already skewed in that we are not creditworthy.”
Biden himself has campaigned to forgive student debt for borrowers who attended historically black colleges and universities (HBCUs) and institutions serving minorities, but he has yet to deliver on that promise.
Democratic lawmakers believe that $ 50,000 in student debt cancellation is the best way to help all borrowers, especially borrowers of color, and help achieve what Johnson set out to do.
“$ 50,000 would help close the racial wealth gap for those with student loan debt,” Massachusetts Senator Elizabeth Warren told Insider last month. “And that would wipe out all the unpaid debts of about 38 million Americans, which would give our economy a huge boost.”