The current health and economic crisis has left many people without jobs, often making it difficult to pay bills, buy groceries and repay debt, including student loans. Student loan debt is a prevalent issue in the United States, with about 44.7 million Americans taking out some type of loan to pay for higher education.
Student loan debt is also on the rise, with 2020 graduates carrying student debt that’s 20% higher than 2010 graduates. The amount of student loan debt is not only impacted by the growing cost of higher education, but also by race. A study conducted by the Brookings Institution found that students of color often owe $7,400 more than their white counterparts. Student loan debt ultimately follows students throughout their career, influencing where graduates live, what job they pick, when they can start a family or buy a home, and ultimately becoming a barrier to building generational wealth.
In response to the crisis, the Biden administration extended the pause on student loan payments until January 31, 2022. This marks the fourth time in the last two years that student loan payments have been paused. However, many people are still struggling to manage their student loans and meet the required payments. A new report put out by Forbes found that $40 million were garnished from wages during the loan repayment pause, reducing the benefit of the government program.
The Impact of Reducing Student Loan Debt
In 2019, Robert F. Smith paid off student loans for the entire graduating class (and parents) of Morehouse College, a historically Black college. Since receiving this gift, recipients report feeling more free to pursue their passions and goals, and some have been able to purchase homes and invest. Black Americans have been historically left out of many opportunities to build wealth, so freeing Black Americans to purchase homes is an important move toward reducing the racial wealth gap.
“Over the last two years, it’s been so significant,” said Morehouse 2019 graduate Jarvis Mays. “Because I have that space and freedom to take risks…I’ve made decisions that I wouldn’t have thought I would ever make [like quitting a job that wasn’t quite right and trying to start my own nonprofit].”
Aiming to have an even larger impact, Smith recently helped launch Student Freedom Initiative, a nonprofit dedicated to freeing students from the burden of student loan debt. Student Freedom Initiative provides an income-contingent funding alternative for rising junior and senior STEM majors along with academic resources, internships and more to help minority serving institutions increase their overall capacity. Student Freedom Initiative works to help ease students from the long-lasting impact of student loan debt by acting as a catalyst to help students attain the skills and confidence needed to succeed in life after college.
Learn more about the disproportionate impact of student loan debt on students of color and Smith’s work to alleviate the disparity.