Cancel it Now: The Unconstitutional Nature of Student Debt 

By Elyse Hicks, Consumer Policy Counsel

We are well into the Biden administration and approaching a pivotal time in his Presidency where all hope could be lost on an issue I care a lot about: student debt. We are facing the possible flipping of Congress, student borrowers are in constant flux–unaware of when their loan servicers will be unleashed on them in the midst of a broken repayment system… and I’m afraid. I, like the rest of us, am still waiting for a portion of federal student debt to be canceled, one of Biden’s biggest campaign priorities. And despite the chatter of this announcement being forthcoming, we’re still on standby.

Student debt and lending continue to be a lucrative business for loan servicers, at great cost to the rest of us. This cost, from origination fees to interest-bearing loans while earning degrees disproportionately affects those who have been historically disenfranchised and exacerbates the ever-growing wealth disparity in the United States. I’ve been impacted personally – but this should matter to all of us.

To put this into perspective, African Americans still owe 95% of their student debt 20 years after enrollment. The “American Dream” is miles from reality, and this is so much more than a politician making good on what was promised. It’s the realization of the “certain inalienable rights” set forth in the Constitution that’s at stake, and the debt that stands in the way of that. 

To Make the American Dream Accessible and Achievable for All 

To make it plain, the state of student lending practices is a tangible symptom of a greater issue. 

Race, and how it has informed American jurisprudence, our beliefs about one another, and the wealth disparity make the American dream accessible to only a few of us, namely those who’ve historically held power throughout history. Borrowing money to earn post-secondary and postgraduate degrees was intended to be a way for people of color to level the playing field, earn a living wage, purchase a home, and take care of a family. In reality, it’s had the opposite effect. AFR’s proposal to cancel federal student loan debt, restore a statute of limitations, and the ability to discharge student loans in bankruptcy proceedings restore the intended purpose of higher education. 

The cost of living has risen, but wages have not. From 1960-2015, the average starting salary for new college graduates, adjusted for inflation, rose by $2,777. At the same time, tuition costs have risen 212% since 1987. Looking deeper at the cost of education versus the cost of living from a racial and gender equity lens, “Black women hold median student debt burdens that are two-thirds higher than for white men. Yet due to pervasive pay discrimination, even highly educated Black women earn only 65 cents for every dollar earned by white males” according to research conducted by the Center for Responsible Lending. This fact alone dispels myths regarding the “transfer of wealth” or the idea that student debt cancellation would offer a disproportionate benefit to those who graduated from an ivy league college or simply went on to earn graduate degrees with higher earning potential. 

There’s a changing tide in the cost-benefit analysis on the value of a college degree. It’s essentially the glass floor, or right of entry, to landing jobs that don’t even go on to pay a living wage. On top of this, most jobs also require experience – ultimately deterring student debt holders from working in their field of study. AFR’s proposal to the CFPB to regulate income share agreements and watchdog for-profit colleges whose goal it is to provide degrees at astronomical prices restores the incentive to earning a post-secondary degree and create a more “informed” and competitive workforce without the punishment of wage garnishment for those in need. 

Embedded in the Constitution are Certain Inalienable Rights…Life, Liberty, and the Pursuit of Happiness. Student Debt Infringes Upon All Three. 

 Life

Looking realistically at funding college and the disproportionate effect it has on people of color and low-income Americans, student debt does not bring these groups ahead. Instead, BIPOC communities begin their adult lives in a financial hole. The outlook on life, while once bright during and immediately after undergraduate studies, is clouded for 20 to 30 years, and sometimes even longer. Each additional degree brings about a greater expense and more cloudiness, making the benefit of education at the end of it all less valuable. A significant portion of one’s salary is now predetermined to go back to a loan servicer, and because certain student loans are no longer dischargeable in bankruptcy proceedings, student debt holders will be digging themselves out of a financial rut for the foreseeable future. Broad based student debt cancellation for as many student lending consumers as possible restores the idea of what college was designed to provide – a better, brighter future, and more abundant life. 

 Liberty

Student loan debt significantly dampens the ability to purchase a home. According to an analysis from New America, consumers under the age of 35 owe a combined total of over $620 billion in student loans as of mid-2019. When Equifax asked millennial renters in 2015 why they had not bought a home, 55.7% of respondents cited “student loan debt/not enough money saved” as the top reason. As of the first quarter of 2021, the homeownership rate of non-Hispanic white households was 73.8% compared to 45.1% of Black households, according to the U.S. Census Bureau. 

Student loan debt is not an isolated crisis. It affects other significant parts of our lives, and while receiving an education is designed to increase personal and civil liberties, it often hinders them. Prioritizing loan servicing rulemaking that sets standards for repayment options that consider fundamental liberties is important to how we move forward towards economic equality. 

…And the Pursuit of Happiness

Student loan debt also determines which dreams a consumer can realistically pursue and which ones will be forced to become a distant memory. Borrowers may find themselves sacrificing a job that offers more fulfillment and purpose for careers with higher salaries. A recent UCLA study found that “student loans have the most negative relationship to life satisfaction.” 

To create a better society, student debt cancellation is paramount to even the playing field for BIPOC communities who remain decades behind in earnings compared to white males. Happiness is no longer owned by a select few. President Biden must act on his priorities and restore the right for borrowers to choose their destiny and pursue a gratifying life and career. 

We are calling on the White House to restore order to a practice that was designed to help and not hinder, and to level the playing field for people of color and low-income citizens who have previously been openly discriminated against and now are still disproportionately affected by the trickle-down systemic nature of racism through economics and education. 

[1] Student Loan Debt Statistics [2021]: Average + total debt. Education Data Initiative. (2021, November 17). Retrieved November 22, 2021, from https://educationdata.org/student-loan-debt-statistics. 

[2] The Annie E. Casey Foundation. (2020, April 20). Solutions to the student debt crisis in a time of economic distress. The Annie E. Casey Foundation. Retrieved November 22, 2021, from https://www.aecf.org/blog/solutions-to-the-student-debt-crisis-in-a-time-of-economic-distress?gclid=Cj0KCQiA-eeMBhCpARIsAAZfxZBeNml4XG8thYbSLrj-6wsWvY1lNZV9vJYYIYr3HE4xvUXD6Q-Op1EaAhBjEALw_wcB. 

[3] Katz, N. (2020, June 20). Who are the most educated women in America? black women. ThoughtCo. Retrieved November 22, 2021, from https://www.thoughtco.com/black-women-most-educated-group-us-4048763. 

[4] The Annie E. Casey Foundation. (2020, April 20). Solutions to the student debt crisis in a time of economic distress. The Annie E. Casey Foundation. Retrieved November 22, 2021, from https://www.aecf.org/blog/solutions-to-the-student-debt-crisis-in-a-time-of-economic-distress?gclid=Cj0KCQiA-eeMBhCpARIsAAZfxZBeNml4XG8thYbSLrj-6wsWvY1lNZV9vJYYIYr3HE4xvUXD6Q-Op1EaAhBjEALw_wcB. 

[5]https://www.naceweb.org/job-market/compensation/salary-trends-through-salary-survey-a-historical-perspective-on-starting-salaries-for-new-college-graduates/

[6] Emmiemartin. (2018, April 17). Home prices have risen 114% since 1960 – here’s how much more expensive life is today. CNBC. Retrieved May 11, 2022, from https://www.cnbc.com/2018/04/17/how-much-more-expensive-life-is-today-than-it-was-in-1960.html

[7] “Necessary Relief: Substantial Cancellation Will Ease the Burden of Unaffordable Student Debt (and Boost the Economy).” Necessary Relief: Substantial Cancellation Will Ease the Burden of Unaffordable Student Debt (and Boost the Economy) | Center for Responsible Lending, 10 May 2022, https://www.responsiblelending.org/research-publication/necessary-relief-substantial-cancellation-will-ease-burden-unaffordable-student.

[8] Williams, T. (2021, September 8). 10 Ways Student Debt Can Derail Your Life. Investopedia. Retrieved November 22, 2021, from https://www.investopedia.com/articles/personal-finance/100515/10-ways-student-debt-can-destroy-your-life.asp. 

[9] Williams, T. (2021, September 8). 10 Ways Student Debt Can Derail Your Life. Investopedia. Retrieved November 22, 2021, from https://www.investopedia.com/articles/personal-finance/100515/10-ways-student-debt-can-destroy-your-life.asp. 

[10] Campisi, N. (2021, June 18). The black homeownership gap is worse. here’s what’s being done. Forbes. Retrieved November 22, 2021, from https://www.forbes.com/advisor/mortgages/black-homeownership-gap/. 

[11] Education pays off handsomely, but borrowing for it makes people unhappy. UCLA Anderson Review. (2020, November 14). Retrieved May 11, 2022, from https://anderson-review.ucla.edu/student-loan-happiness/