The U.S. Department of Education has announced a fourth extension of its temporary pause on student loan repayments, setting a “definitive end date” of January 31, 2022. The moratorium—which suspended all payments on federally held student loans, nonpayment penalties, and interest—was originally established in March 2020 under the Coronavirus Aid, Relief, and Economic Security Act, and had been set to expire on October 1.
In a statement, education officials said they hope “this final extension will give students and borrowers the time they need to plan for restart and ensure a smooth pathway back to repayment.”
While college access advocates and Democratic lawmakers applauded the decision, they also urged the Biden administration to take more permanent action to mitigate the debt burden. In a statement, Sen. Majority Leader Chuck Schumer (D-N.Y.), Sen. Elizabeth Warren (D-Mass.), and Rep. Ayanna Pressley (D-Mass.) urged the president to cancel student loan debt.
“Our broken student loan system continues to exacerbate racial wealth gaps and hold back our entire economy,” they wrote, adding that “Student debt cancellation is one of the most significant actions that President Biden can take right now to build a more just economy and address racial inequity.”
Rising debt, slow wage growth worsening racial wealth gap
A Wall Street Journal analysis reinforces the connection between student debt and racial disparities, highlighting how student loan debt has prevented Black borrowers from building wealth.
Drawing on Federal Reserve and U.S. Census data, the Journal calculates that, after adjusting for inflation, the median net worth of U.S. households with Black college graduates in their 30s “has plunged over the past three decades,” falling from $50,400 to $8,200. During that same timeframe, the median net worth of households with white college graduates in their 30s grew by 17 percent, reaching $138,000.
The Journal attributes this widening gap to a combination of “skyrocketing student debt and sluggish income growth.” Whereas three decades ago, just 35 percent of households with Black college graduates in their 30s had student loan debt, now 84 percent do (compared with 53 percent of white college-educated households)—and the median amount owed is $44,000. That figure was less than $6,000 three decades ago. Following decades of racist lending policies and other barriers to building wealth, Black parents, the Journal notes, have been less likely than white parents to be able to cover their children’s college costs, increasing reliance on loans.
Further exacerbating gaps, college graduates’ median income has not kept pace with the increase in debt: it grew by just 7 percent between the early 1990s and the late 2010s for Black college-educated households in their 30s. White college-educated households in their 30s, meanwhile, had 13 percent income growth.