Noting the persistent bipartisan support for—and expansion of—income-driven loan repayment (IDR) plans across the last decade, Demos policy analyst Mark Huelsman asserts that by focusing on income, rather than wealth, IDR “could put our country’s borrowers of color even further behind.” Demos is a public policy organization advocating for pathways to ensure a “diverse, expanded middle class in a new, sustainable economy.” Writing in The Washington Post, Huelsman acknowledges the theoretical benefits of payments that rise and fall with a borrower’s income but says the model overlooks the fact that individuals with similar incomes may actually have drastically different resources.
Huelsman highlights the significant disparity in the amount of wealth held by white families versus that held by Black or Latino households. He calculates that among households with a typical middle-class income and $30,000 in outstanding student loans (about average for a bachelor’s degree recipient), annual student loan obligations would consume nearly 40 percent of the financial wealth of a typical black household versus 10 percent of the typical financial wealth of a white household.
Huelsman cautions that he isn’t advocating for wealth-based loan repayment, which could compel borrowers sell homes or withdraw from 401(k) savings. Rather, he calls for shrinking “the debt itself,” to truly ensure that “higher education reduces rather than reflects inequality.”