Although the legal battles wage on over President Joe Biden’s student loan debt forgiveness program there may be some relief. The U.S. Department of Education has stated that student loan borrowers who made payments on their debt during the pandemic-era pause on the bills could be automatically refunded. Even with total forgiveness on hold, refunds still have the potential to start closing the racial wealth gap.
The Breakdown You Need To Know:
More than 9 million people made at least one payment on their federal student debt between April 2020 and March 2022, according to the government, so a refund could go a long way. Now a Trump appointee, Texas-based Judge Mark Pittman, struck down Biden’s broad student loan forgiveness program and issued a nationwide injunction purporting to block it across the country.
This refund process will be automatic for borrowers who are eligible for student loan forgiveness. CultureBanx reported that the roughly five million student loan borrowers who have commercially held Federal Family Education Loans (FFEL) weren’t eligible for the payment pause, and won’t be for the refund either.
Applications forgiving $10,000 in student loans per borrower making less than $125,000 have now been closed due to the aforementioned nationwide injunction. Herein lies the problem, about 19% of households that have total incomes below $125,000 have student loan debt, according to the Urban Institute. The Roosevelt Institute brief shows that canceling up to $50,000 of student loan debt per borrower would immediately increase the wealth of Black Americans by 40%.
Not to mention that four years after graduation, the average Black borrower owes $53,000, while the average white borrower owes $28,000, according to the Brookings Institute, meaning they are unable to focus on other financial goals like buying a home, paying off credit card debt, and saving for retirement. Eliminating this debt will start to narrow the racial wealth gap for young families, with 86.6% of Black students taking out federal loans to attend four-year colleges.
The vast majority of borrowers haven’t made any payments, taking advantage of the suspension of the bills and accrual of interest. Biden’s administration has already announced its intent to appeal Pittman’s ruling to the ultra-conservative US Court of Appeals for the Fifth Circuit.