Student Debt Cancellation IS Progressive: Correcting Empirical and Conceptual Errors

SSRN Electronic Journal ◽

10.2139/ssrn.3909430 ◽

2021 ◽

Author(s):

Charlie Eaton ◽

Adam Goldstein ◽

Laura Hamilton ◽

Frederick Wherry

Keyword(s):

Student Debt ◽

Debt Cancellation

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A Pathway to Racial Equity: Student Debt Cancellation Policy Designs

Social Currents ◽

10.1177/23294965211024671 ◽

2021 ◽

pp. 232949652110246

Author(s):

Raphaël Charron-Chénier ◽

Louise Seamster ◽

Thomas M. Shapiro ◽

Laura Sullivan

Keyword(s):

Negative Impact ◽

The United States ◽

Policy Outcomes ◽

Student Debt ◽

Racial Equity ◽

Racial Wealth Gap ◽

Consumer Finances ◽

Debt Cancellation ◽

Key Policy ◽

The Impact

Student debt in the United States has had a disproportionate negative impact on black and Latinx borrowers. We argue that analyses of plans proposing student debt cancellation should therefore foreground their potential impact on racial equity. To do so, we use data from the 2019 Survey of Consumer Finances and model the impact of debt cancellation on four key policy outcomes (reach, impact on the most vulnerable borrowers, borrower wealth gains, and impact on racial wealth gaps). We examine universal policy designs as well as designs that incorporate an income eligibility threshold as a means of targeting benefits toward less affluent borrowers. We find that cancellation amounts ranging from $50,000 to $75,000 yield the most desirable outcomes, especially when paired with a relatively low household income eligibility cutoff at between $100,000 and $150,000. Such policies would cancel roughly half of all outstanding student debt without substantially expanding the racial wealth gap, while still reaching a large majority of borrowers and leading to substantial wealth gains, especially for black households.

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