Remaking America’s Promise for the Next Generation
By Anne Price, President
Last week, presidential candidate Elizabeth Warren unveiled a sweeping plan to tackle a $1.5 trillion student debt crisis to address our higher education system that is holding back generations of Americans. Her proposal calls for wiping out student debt of up to $50,000 for 42 million working and middle class Americans. Moreover, 90 percent of those who are burdened with student debt but dropped out of college would also benefit. The proposal makes all public colleges’ tuition and fees free, adds $100 billion in Pell grants over ten years, and creates a $50 billion fund for HBCUs (historically black colleges) and other minority-serving institutions. Senator Warren plans to pay for it with an annual 2 percent tax on families with $50 million or more in wealth.
Warren’s plan is sparking a debate about the scale of federal support needed to address the student loan crisis and surfacing narratives about fairness and deservedness. It also provides us the opportunity to examine how corporate power and anti-Black racism is depriving an entire generation of young people from getting ahead, whether that’s buying a home, saving for retirement, starting a family, or launching a business. Student debt ultimately serves as a multigenerational debt anchor that causes unrelenting stress, financial strain, and a spiraling cycle of debt.
Who carries debt and who defaults on their loans is racialized and gendered. About 11.5 percent of student loans are in default. According to the New York Federal Reserve, borrowers between the ages of 40 to 49 have the worst delinquency rates. It is estimated that in the next five years, 40 percent of borrowers are likely to default.
Last month we released a report about millennial women — defined as those born between 1980 and 1997 — showing that two-thirds of student debt ($900 billion) is owed by women. And roughly $700 billion of outstanding loan balances are held by Americans under 40.
Student debt is particularly devastating for people of color, especially Black Americans. Nearly half (49 percent) of all Black borrowers who first enrolled in college in 2004 defaulted on at least one loan within 12 years — a rate that is more than twice that of white students (20 percent). This is happening for multiple reasons, the foremost being that due to centuries of racist, problematic government and free market policies and practices, Black families have limited to no wealth to fall back on to help offset the cost of college.
Our report, Bootstraps for Black Kids highlights how a greater proportion of white adult children receive financial support from their parents for higher education — 34 percent compared to 14 percent. This is not due to lack of desire to help their children. In fact, Bootstraps shows that Black parents with more limited resources display a greater inclination to provide financial support for their children’s education than their white counterparts. Creating a student debt policy and implementation that takes this reality into account is extremely important.
We can also use Senator Warren’s proposal as an opportunity to interrogate the role that corporate power plays in the student loan crisis. According to the Roosevelt Institute, the dynamics in the markets and public power can help us see the student loan crisis in a new light. For instance, the fact that employers can demand a college degree for some positions without offering higher wages simply does not make financial sense. Labor markets demonstrate that younger adults — those aged 25 to 40 — have not seen increases in earnings that would justify the debt they hold. Roosevelt notes that “the profit motive gives private companies in the higher education system an incentive to find ways to extract as much as possible from the government and students that companies can cash in for political influence.” For-profit colleges and the private providers that service student debt create industries that put shareholders first over broader, public higher education goals.
It’s time to remake the American promise that something better awaits the next generation. It is time to build a higher education system that provides equal access to college regardless of race and income level. Our nation has a long history of inequitable college access and affordability policies, like the GI Bill, that largely limited college access and affordability for people of color. We must seize opportunities to preserve our higher education system as a public good and also be willing to enact bold, transformative policies to address long-standing and massive racial and gender wealth inequities. Such change will be good for the future of our nation, lifting up not just one generation, but multiple generations for which family resources are stretched and one generation is sacrificing its financial well-being for another.