The Argument for Considering Wealth, Not Income, When Forgiving Student Loans

The burden of student debt in this country is crushing millions of Americans’ hopes for financial success and economic freedom. Over $1.6 trillion of student loan debt looms over the economy. Many Americans agree something should be done to remedy the crisis, but disagree on how to go about it. For some, there’s a popular mindset of “I had to take on loans, so you should too.” For others, paying off their student loans will never be a reality without debt cancellation. Some proposals base loan forgiveness on income, but fail to account for wealth disparities in the U.S.

“Tuition spikes put the student loan debate in a different category…Just like the housing crisis… if we don’t do something, the entire economy can suffer.” –Andre Perry, Brookings Institution 

Listen: Brookings Institution’s Andre Perry on why the U.S. should cancel student debt based on wealth inequalities. 

Guest:

Andre Perry is a senior fellow in the Brookings Institution’s Metropolitan Policy Program. His recent paper is titled, “Student debt cancellation should consider wealth, not income.”

“Student debt actually ranks second among all forms of debt in the United States,” says Perry. “It’s the second behind mortgages, which is actually a good form of debt.”

When it comes to loan forgiveness, Perry says wealth is what policymakers should be looking at. “The reality is many low-wealth, high-income people are struggling to build wealth because of student debt,” he says. “51% of all student loans are taken out by people with zero or negative wealth.”

Perry says there’s a vicious cycle needed to achieve basic financial stability in America, “Tuition has outpaced inflation. So people are really going to college essentially to make a living, but they’re being saddled with debt.” He says basing a loan forgiveness program on income, like President Biden’s plan, ignores the influence of generational wealth. “Biden’s plan does really little when you look at the wealth inequality in this country,” says Perry. 

Web story written by Nora Rhein.