Widening of the Racial Wealth Gap with a Return of Student Loan Payments

By: Madhav Patel

On May 1, 2022, the United States (US) government will terminate student loan relief that was initiated during the coronavirus disease 2019 (COVID-19) pandemic.1 This represents an additional 90 days of forbearance from the previous announcement that loans would terminate in February, however, this may be the final extension.1 With this decision incurring an estimated $85 billion collective loss among 18 million students, this decision may have devastating consequences, especially for students of color.2

Kori Hale (CEO of CultureBanx) comments on how revoking this program will likely increase existing racial wealth gaps, in an article published in Forbes.2 With Black students accruing >80% more school debt compared to Caucasian individuals, and this discrepancy amplifying by 7% each subsequent year following their education (according to a study in Sociology of Race and Ethnicity), racial disparities in debt are already substantial.2 This may be in part due to existing generational disparities in wealth among Black households, forcing a greater dependence on student debt.3 As a consequence, colored individuals often face heightened difficulties with financial pursuits/commitments such as home ownership, credit card debt, and retirement savings.2