What We Know: The Current Status of Student Debt
The student loan debt crisis in the United States is a major issue that impacts millions of borrowers across the country. For many students, pursuing a college degree has become a costly endeavor. In the last 30 years, tuition costs at public four-year colleges have more than doubled, while private nonprofit institutions have seen even steeper increases.¹ Consequently, the Pell Grant is no longer enough to cover the cost of college. Additionally, states have made huge disinvestments in higher education. As a result, borrowers must turn to student loans now more than ever. In fact, over half of all students leave school in debt. Even more concerning is the fact that women and people of color tend to have higher student loan balances than their White male peers. Clearly, the burden of student loan debt is a pervasive issue that affects individuals of all ages and backgrounds, with borrowers in their 30s and 40s carrying a significant portion of the total federal loan debt. The average student loan debt for college seniors graduating from private and public nonprofit institutions in 2019 was $28,950 per borrower² and, as previously stated, women and people of color are disproportionately affected by this burden. According to recent statistics, Black graduates owe an average of $25,000 more than their white counterparts³. This creates significant financial barriers for Black communities, limiting their ability to invest in education or attain financial stability.
With staggering amounts of student loan debt weighing down young students and recent grads, it is important to understand the specific disparities between student loan borrowers and the deeper implications of such debt. The report, Jim Crow Debt, published by The Education Trust and in partnership with Jalil B. Mustaffa, Ph.D., dispels the notion of student loans as "good debt." ⁴ Despite being touted as "good debt," student loans can have deeply negative consequences for Black borrowers. One reason for this is that Black borrowers often have to take out larger loans than their White peers due to the systemic racial wealth gap. This ultimately leads to higher debt burdens and a greater likelihood of default. Additionally, Black borrowers, because of the racial stratification of the labor market, are less likely to earn incomes that can comfortably handle student loan payments. In 2018 alone, the median annual earnings of White men and women with a bachelor's degree were 30% and 19% higher than those of Black men and women with equal education.⁵ In fact, due to the racially stratified labor market, they are more likely to experience underemployment and unemployment, exacerbating repayment issues. The lack of state investment in higher education also forces many Black borrowers to take out loans to pay for college rather than having access to more affordable options. As a result, student loan debt can hinder social mobility and perpetuate more severe economic hardship for Black borrowers.
A report, How Black Women Experience Student Debt, also produced by The Education Trust, indicated that Black women are disproportionately burdened from the student loan debt crisis, as they are more likely to enroll in college and accumulate more debt than any other demographic. It is estimated that on average, Black women hold more than $30,000 in student loans, with a higher rate of delinquency and default than any other group. This has resulted in a devastating impact on financial prospects, including hindering the ability to build wealth, buy homes, and save for retirement. Additionally, Black women face some of the worst discrimination in the job market, often competing with individuals with less educational attainment. The systemic racial wealth gap further exacerbates this problem, continuing the cycle of debt. These issues demonstrate the urgent need for systemic change to address the root causes of the student loan debt crisis and the racial wealth gap, especially for Black women.⁶
Public Service Loan Forgiveness Updates
The Public Loan Forgiveness (PSLF) Program was established under the College Cost Reduction and Access Act of 2007. This program allows Direct Loan borrowers who make 120 qualifying monthly payments to have the remainder of their balance forgiven. Borrowers must be paying their loans under a qualifying repayment plan and be working full-time for a qualifying employer under the program.⁷ The PSLF program has undergone numerous changes since its institution and the COVID-19 pandemic brought needed relief for borrowers. However, many of these changes⁸ were provisional and temporary, including but not limited to issuing a one-time adjustment and crediting borrowers with earned progress toward forgiveness, the Limited PSLF Waiver, and the Fresh Start Program. According to the Department of Education, as of May 2023, it has approved a total of $42 billion in Public Service Loan Forgiveness (PSLF) for approximately 615,000 borrowers since October 2021.⁹
On July 1st, The Department of Education will institute permanent improvements to the PSLF program, making repayment easier for many borrowers. These permanent changes include helping borrowers earn progress toward PSLF, streamlining the process for borrowers to verify their employment, and providing further opportunities to correct issues with the PSLF program. These regulations will help borrowers earn progress toward PSLF by ensuring credit on late payments, payments that are made in installments, and payments applied in full; including certain periods in deferment or forbearance toward PSLF; and the provision of weighted average on existing qualifying payments toward PSLF when consolidating Direct Loans. These regulations will also streamline the process for borrowers to verify employment by adopting one standard of full-time employment of 30 hours a week, mandating that employers, for purposes of PSLF, issue adjunct and contingent faculty credit of at least 3.35 hours of work for every credit hour taught, and permitting a qualifying employer to certify employment for a contractor if that individual is providing services that, by State law, cannot be filled or provided by an employee of that organization. Further, these regulations will provide further opportunities to correct issues with the PSLF program by allowing borrowers to access a hold harmless option to have other periods of deferment and forbearance potentially counted toward PSLF if they make payments equivalent to what they would have owed at the time, including credit for periods during which the borrower would have had a $0 payment, and formalizing the reconsideration process for borrowers to have their applications reviewed again if there were errors made in the review process.¹⁰
Threats to Debt Relief
While the PSLF regulations are due to take effect on July 1st, other issues threaten the future of student debt relief. Most recently, the Congressional Review Act (CRA) passed both the House and Senate, imposing major changes for all student loan borrowers and severely impacting Black borrowers. On June 7th, President Biden vetoed the CRA, which would have impacted tens of millions of borrowers.¹¹ Among the many negative outcomes, this CRA would have canceled regulations covering extensions of federal student loan payment suspensions, including waivers of interest on such loans that were first provided under the 2020 Covid-19 aid package, sixty days after June 30th; denied relief to approximately 26 million borrowers who had applied for debt relief and 16 millions of whom have already had their applications formally approved; put the majority of student loan borrowers at risk of delinquency and default; required over 40 million borrowers to pay back already relieved interest charges; created confusion for borrowers about what the total amount monthly payments will be due to interest charges; required more than 70,000 public servants to pay back loan payments that have been rightfully discharged under PSLF; and halted borrowers' progress toward PSLF and income-driven repayment (IDR).¹²
As opponents work to undermine progress in student debt relief, advocates are faced with upcoming Supreme Court decision regarding Biden's debt relief plan. Biden's plan would "cancel $10,000 of student debt for all borrowers who earn less than $125,000 annually and $20,000 for borrowers who received the Pell Grant in college and also earn less than $125,000 annually." ¹³ The Biden administration used the HEROES Act to enact such debt relief, changing current legal provisions related to student loan programs to address the financial damage resulting from the COVID-19 pandemic.¹⁴ Plaintiffs argue that the Biden Administration did not have such authority under the HEROES Act. As the Supreme Court makes a consequential decision regarding Biden's debt relief plan, the recently passed Debt Ceiling Bill includes some of the stipulations within the vetoed CRA. Under the Debt Ceiling Bill, student loan payments will resume 30 days after June 30th, forcing borrowers to begin repayment as soon as August 30th, ending the payment pause started by President Trump at the onset of the pandemic. Under this deal, Biden, in concert with the Department of Education, cannot authorize another pause on repayment. Such a pause could only be instituted by Congress. While the current Debt Ceiling agreement does not permit any student loan forgiveness, Biden's debt forgiveness program would continue if the Supreme Court rules in favor of the program. ¹⁵
As the nation awaits the outcome of the impending Supreme Court decision, it is important to continue to take advantage of available provisions. The following includes eleven options for debt relief:
This program forgives the remaining balance on a borrower's Direct Loans after making 120 qualifying monthly payments while working full-time for a qualifying employer. Qualifying employers include government organizations, non-profit organizations, and other eligible public service organizations. It's important to note that if a borrower has multiple type of federal student loans, that borrower would need to consolidate all loans first.
This plan bases the borrower's monthly payment on family size and discretionary income. Depending on these factors, borrowers could qualify for a lower monthly payment If a borrower still has a balance at the end of the repayment period, the remaining amount is forgiven. To learn more about IDR.
To qualify for this program, a borrower must be employed in certain public service sectors. These include employment in government agencies, the military, public schools or libraries, and non-profit organizations. A borrower may qualify for partial or full loan forgiveness.
This program forgives up to $17,500 in Direct Subsidized or Unsubsidized Loans or Subsidized or Unsubsidized Federal Stafford Loans for teachers who work full-time for five years at a qualifying school or educational service agency. Only certain subject areas are eligible for this program.
This program provides relief to student loan borrowers who have been deceived by their schools, allowing them to discharge their federal student loans. To be eligible, the misconduct that a borrower experienced must be directly related to the student loans taken out or the educational service for which the loan was provided.
This program cancels student loans for borrowers who were unable to complete their program due to school closure. Eligibility for the discharge is dependent on meeting certain criteria, including being enrolled at the time of the school closure or having the school close within 120 days after withdrawal. Qualifying loans include Direct loans, Federal Family Education Loan Program (FFEL) loans, and Perkins loans.
This provision forgives all federal loans, irrespective of whether they were awarded to the student borrower or the parent (e.g., Parent PLUS loans). Once the loan servicer receives proof of death, such as a death certificate, from a family member or a representative, the servicer initiates the process of discharging the loan. In the case of a private loan, the lender may have other provisions for discharging the loan in case of death.
To qualify for this discharge, a borrower must file for Chapter 7 bankruptcy and also file a separate action called adversary proceedings, where the borrower must prove that repayment of loans would impose undue financial hardship. Not all student loans are eligible for discharge through bankruptcy. Federal student loans are generally not dischargeable, while private loans may be eligible.
A borrower may be eligible for this discharge if the borrower took out direct or FFEL loans and the school of attendance falsely certified the borrower's eligibility to receive the loan. The borrower must be able to demonstrate that the school of attendance falsely certified eligibility for the loan.
If a borrower has been certified as totally and permanently disabled, they apply for student loan discharge. In most cases, a borrower will need to provide medical documentation to verify their disability status. U.S. Department of Veterans Affairs (VA), the Social Security Administration (SSA), or a physician can verify disability status and assist a borrower in applying for this loan discharge.
A borrower may be eligible for unpaid refund charges if they have withdrawn from school and the college attended fails to return the necessary funds to the loan servicer. This type of discharge is available for both Direct and FFEL loans.
How to Move Forward
The student loan debt crisis has far-reaching implications for all borrowers. However, the impact is even more troubling for Black borrowers. High levels of student debt lead to delays in major life milestones, including homeownership and preparation for retirement. This debt also creates barriers for individuals from economically disenfranchised backgrounds by preventing access to higher education due to the high cost of tuition and other fees associated with attending college. These systemic barriers perpetuate inequality and hinder social mobility for Black and other communities.
As the Covid-19 pandemic continues, the federal government has paused federal student loan payments, but this provision hangs in the balance as well. Given historical and present inequities, including the impact of the recent pandemic, it is imperative that we understand these disparities and work to alleviate the burden of student debt for those who need it most. Policymakers must address the student loan debt crisis with comprehensive solutions that prioritize equity and ensure that education and opportunity is accessible to all. Most importantly, we must hold those elected to their promises regarding the cancellation of student loan debt. This includes President Biden's Student Loan Debt Relief Plan which would forgive up to $10,000 in student loan debt or $20,000 for those who received a Pell grant. Biden's relief plan is even more imperative for Black borrowers enduring and seeking to overcome the deeply entrenched economic racism that persists in our country. The NAACP expects the administration to forge pathways of economic freedom by upholding its promises to Black Americans and securing immediate and necessary loan relief.
As Americans await the Supreme Court decision, the implementation of new PSLF regulations, and other debt relief options, the NAACP recommends that borrowers use the Association's website for updated information regarding the upcoming Supreme Court decision,¹⁶ contact their student loan servicer to obtain the most accurate information on their loans, and determine if they are eligible for any of the currently established loan forgiveness programs. While these provisions do not negate the promise made by the Biden administration, it is important that every borrower remain updated on the state of their student loans and present forgiveness options. The NAACP fully expects the administration to forge pathways of economic freedom and uphold its promise to Black Americans in securing immediate and necessary loan relief by working with Congress to secure the President's authority to forgive student loan debt, passing legislation such as the LOAN Act, and ensuring free access to college for all.
To learn more about possible options for repayment, please refer to the provided links for each form of debt relief and NAACP's updated toolkit.
1 Hahn, A. (2023). 2023 Student loan debt statistics: Average student loan debt. Forbes. https://www.forbes.com/advisor/student-loans/average-student-loan-debt-statistics/
2 The Institute for College Access and Success. (2020, October 6). Student Debt and the Class of 2019. https://ticas.org/affordability-2/student-aid/student-debt-student-aid/student-debt-and-the-class-of-2019/
3 Hanson, M. (2023, May 17). Student loan debt by race. Education Data Initiative. https://educationdata.org/student-loan-debt-by-race
4 Mustaffa, J.B. & Davis, J.C.W. (2021, October 20). Jim Crow debt: How Black borrowers experience student loans. The Education Trust. https://edtrust.org/wp-content/uploads/2014/09/How-Black-Women-Experience-Student-Debt-April-2022.pdf
5 Ma, J., Pender, M. and Welch, M. (2019). Education pays 2019. College Board. https://research. collegeboard.org/pdf/education-pays-2019-fullreport.pdf
6 Jackson, V. & Williams, B. (2022, April). How Black women experience student debt. The Education Trust. https://edtrust.org/wp-content/uploads/2014/09/How-Black-Women-Experience-Student-Debt-April-2022.pdf
7 U.S. Department of Education. (n.d.). Public service loan forgiveness data. Federal Student Aid. https://studentaid.gov/data-center/student/loan-forgiveness/pslf-data
8 For a review of past and current PSLF provisions and a review of Biden's debt relief plan refer to NAACP's What Black People Need to Know About Biden's New Student Loan Debt Relief Plan. https://naacp.org/sites/default/files/documents/NAACP%20Loan%20Forgiveness%20Toolkit.pdf
9 U.S. Department of Education. (2023, May 8). U.S. Department of Education Announces $42 Billion in Approved Public Service Loan Forgiveness for More Than 615,000 Borrowers Since October 2021. https://www.ed.gov/news/press-releases/us-department-education-announces-42-billion-approved-public-service-loan-forgiveness-more-615000-borrowers-october-2021#:~:text=Long-term%20Improvements%20to%20PSLF,detailed%20in%20this%20fact%20sheet
10 For a full review of the recently issued PSLF regulations, please refer to the Department of Education's Future of PSLF Factsheet: the https://www2.ed.gov/policy/highered/reg/hearulemaking/2021/futureofpslffactsheetfin.pdf
11 Azoulay, E. (2023, April 3). New Analysis Confirms Congressional Efforts to Overturn Payment Pause and Debt Relief Will Wreak Economic Havoc on Tens of Millions of Borrowers. Student Borrower Protection Center. https://protectborrowers.org/new-analysis-confirms-congressional-efforts-to-overturn-payment-pause-and-debt-relief-will-wreak-economic-havoc-on-tens-of-millions-of-borrowers/
12 Anonymous. (2023). Summary of CRA impact.
13 Toldson, I.A. and White, A.L. (2022). What Black people need to know about Biden's new student loan debt relief plan. National Association for the Advancement of Colored People (NAACP). https://naacp.org/events/making-public-service-loan-forgiveness-work-us
14 Congressional Research Service. (2023, April 24). Student loan cancellation under the HEROES Act. https://crsreports.congress.gov/product/pdf/R/R47505#:~:text=On%20August%2024%2C%202022%2C%20Secretary,fell%20below%20certain%20income%20thresholds.
15 Minsky, A.S. (2023, June 1). Student loan relief and the debt ceiling bill: 5 key takeaways for borrowers. https://www.forbes.com/sites/adamminsky/2023/06/01/student-loan-relief-and-the-debt-ceiling-bill-5-key-takeaways-for-borrowers/?sh=1191fe3c5d8b
16 A full list of partner organizations tracking the state of student loan debt is provided in the PSLF toolkit document.