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The JPMorgan Chase Institute hosted a Data Dialogue on November 19, 2020, to discuss student loan debt in the context of COVID-19 and disparities in how different socioeconomic and demographic groups manage student debt. The virtual discussion convened experts who are at the forefront of using data to better understand student loan issues and policies. The panel included Darrick Hamilton, Henry Cohen Professor of Economics and Urban Policy at The New School and founding Director at the New School’s Institute for the Study of Race, Stratification and Political Economy, Frederick Wherry, Professor of Sociology and Director of the Dignity and Debt Network at Princeton University, and Seth Frotman, Executive Director of the Student Borrower Protection Center. See below for a summary and replay of the conversation.
Data Dialogue: Student Loan Debt: Racial Disparities and Shared Family Burdens
(18879534)111920 JPMC Institute Data Dialogue - UCG pip (Archive 111920 157 PM)
[00:00:00.45] FIONA GREIG: Good afternoon, everybody, and thank you for joining our JPMorgan Chase Institute data dialogue, where we're going to focus on the racial disparities and shared family burdens involved in student loan debt. For those of you who are new to our work, the JP JPMorgan Chase Institute is an economic think tank founded five years ago with the goal of utilizing JPMorgan Chase's administrative data to produce analyses and insights for the public good. Our research covers key themes including household income and spending, household debt, health care, labor market, small business, cities and local communities, and financial markets.
[00:00:33.81] As one quick housekeeping note, please remain muted throughout the conversation. And with that, why don't we jump in. So just to set the stage a little bit, I think it's worth acknowledging that student loan debt is increasingly becoming a more important policy and financial health issue. Borrowers in the US collectively owe about $1.6 trillion in student debt, and the CARES Act signed into law in March in response to COVID-19 automatically put student loan borrowers in forbearance, meaning that their payments were automatically stopped. And that's true throughout the end of the year.
[00:01:14.79] The economic impacts of COVID-19 are likely to exacerbate the burden of student loan debt, particularly for those who are already most burdened, and students may now face a historically weak labor market after graduating. Borrowers, practitioners, and policymakers are looking to the new Biden administration to see how they will address the issue of the student loan debt, and we will be coming to that conversation later on.
[00:01:39.00] In the meantime, we're honored to be joined by a panel of experts who are at the forefront of this very important work. So I'm pleased to introduce and learn from Frederick Wherry, who is professor at Princeton University and director of the Dignity and Debt Network. We have Darrick Hamilton on the line, who is the Henry Cohen Professor of Economics and Urban Policy at the New School and Founding Director at the New School's Institute for the Study of Race Stratification and Political Economy. And we are joined by Seth Frotman Executive Director of the Student Borrower Protection Center.
[00:02:12.39] So to start the conversation, I actually want to share one or two of our top line observations from the JPMorgan Chase Institute's most recent student loan debt report, which we released in October, where we combined de-identified checking account data with Credit Bureau data and public voter registration records on race to better understand how people of different socioeconomic and demographic groups manage their student debt. And I just want to make three quick points.
[00:02:39.46] So first we find that while most student loan borrowers are not unreasonably burdened by student loan payments, a large number of borrowers still struggle to keep up. And those borrowers are already economically vulnerable. They tend to be lower income, older, and especially Black borrowers.
[00:02:55.35] Secondly, the economic impacts of student debt extend to a much broader portion of the population than previously understood. We find that almost 40% of individuals involved in student loan repayment are helping someone else pay off their student loan debt, with most helpers holding no student loan debt of their own. So this is really a family affair. This is not just about the student. It is also about the parent, and in some cases, it's about the parents' debt on behalf of the student and vice versa.
[00:03:28.35] And third, importantly, we observe significant disparities across racial groups in managing student debt, which we can attribute to a myriad of structural forces. Indeed, Black borrowers appear to experience more challenging circumstances related to student loan debt relative to white borrowers according to every metric we explored. They are more likely to hold student loan debt in the first place. They have higher balances than white individuals.
[00:03:54.03] Compared to white borrowers, Black borrowers are much more likely to be significantly behind on their repayments and twice as likely to be experiencing an increase in their loan balances over the course of one year. That is to say, Black borrowers are more likely to face a student debt trap due in part to the fact that they have lower incomes and asset holdings, and likely fewer people in their network who may be able to assist with repayment when they need help.
[00:04:19.09] So I'm going to turn to the panel now, and I'd really love to continue to sort of set the stage in terms of facts and policy. So Seth, I'm going to start with you. You're an expert in the higher education advocacy space, serving as the student loan ombudsperson for the CFPB and the Founding Director of the Student Borrower Protection Center. What else would you add to the landscape in terms of both core facts, but also the policy landscape? What are the key issues on the table?
[00:04:45.40] SETH FROTMAN: Sure. And thank you so much for having me here today with this amazing panel. So in one job or another over the last decade, I have spent most of my time talking to people who have just found themselves struggling with student debt in big cities and rural communities. And the number one question that I always get is, you read about student debt on the news, you see it on TV. Is it as bad as people are making it out? And my answer is always no, it's actually quite a bit worse.
[00:05:20.31] And I think what I'm here to do is kind of set the stage and level set where we find ourselves. So as Fiona mentioned there is now more than $1.7 trillion of student loan debt. That means there's more student loan debt than there are all car loans. There's more student debt than there is credit card debt in America, with nearly 45 million Americans getting a student loan bill each month.
[00:05:44.91] The amount of student loan debt in this country has increased by 110% in just the past 10 years, surpassing any other type of consumer debt in America, and we are slated to hit $2 trillion in just a few short years in 2025. And I think something incredibly important to point out is that this is not just 45 million Americans who collectively got together to make a bunch of bad decisions. We have seen the tremendous growth in higher ed, the cost of higher education in America, and that has a direct impact on the growth of borrowers. So the average borrower's balance has increased by 60% in just the past 10 years, with the average student loan borrower owing now more than $35,000.
[00:06:34.84] And sometimes we hear people talk about we shouldn't be worried about people with student debt because most of these borrowers have relatively small amounts. And that fact is no longer actually true. We see almost one in five borrowers, or nearly eight million Americans, who owe more than $50,000 in student loan debt.
[00:06:58.10] So another thing that you hear on Twitter or social media or places where you shouldn't read the comments is this is just a bunch of Millennials eating too much avocado toast or whatever the meme is that it's hard to keep track of. And nothing could be further from the truth for a ton of reasons. But a large one is because this is truly an intergenerational problem. So one in five student loan borrowers is now above the age of 50. And in fact, borrowers over the age of 50 owe almost three times more than those age 24 or less.
[00:07:32.68] When I was at the CFPB, we actually found that over 1/3 of borrowers over the age of 60 with a student loan skipped out on health care, medicine, doctor visits, and dental care because they couldn't afford to. And we're going to hear a lot more about this on the panel today, and Fiona mentioned it, but while the student debt crisis is certainly impacting large swaths of the American population, it has been particularly punishing for borrowers of color. So just a few more stats.
[00:08:01.39] At graduation, Black borrowers with a bachelor's degree owe nearly 50% more student debt than their white peers. And a remarkable staff from the Federal Reserve Bank of New York, the average student loan debt in a majority Black zip code is $37,000, while the average income is $38,000. And then truly one of the most damning stats about the student debt and higher education in America, 20 years after starting school, the median Black borrower still owes 95% of their original student loan balance, while the median white borrower has paid off almost 95% of their loan.
[00:08:41.83] And in truth, borrowers are just hurting. Another student loan borrower defaults every 26 seconds of every single day. In fact, the rate of student loan delinquencies right before COVID hit was 20% higher than mortgage delinquencies. And one of the things that I always just try to reiterate is people are hurting beyond those just who are failing to pay their bills.
[00:09:08.38] We see student debt impacting small business formation, two millions fewer small businesses in America because of student loan debt. Impacting housing. $400,000 less homes we can attribute to the rise of student loan debt. Hampering wealth accumulation. We find that households without student loan debt have median net worths seven times more than those with debt. You also see student loan borrowers less likely to start a family, career choice, educational decisions, and on and on.
[00:09:39.85] So I think it is important to realize this is what the Biden administration is coming into office with. This is the landscape they face. And a reminder, all of these stats are before COVID hit. So I think we're going to talk today about the payment pause we're going to talk about debt cancellation. But it is important to just understand the tremendous suffering that millions of Americans are facing simply because they took on the debt that was supposed to give them and their families a better life.
[00:10:08.18] FIONA GREIG: Thanks so much, Seth. Those are staggering statistics. Certainly the 95% balance remains versus 95% pay down, I mean, it's just-- Darrick, I want to bring you in. You are a prolific writer on racial disparities and financial outcomes generally, but student loans in particular. And you've been involved in crafting a number of policy proposals, testified before Congress. You have advised numerous presidential candidates. I see you very active on Twitter in advising the President-elect.
[00:10:43.58] So come on into the conversation. Tell us more about the issues of college accessibility, racial disparities and student loans, and what you see as promising policy proposals that you think we should be taking up.
[00:11:04.12] DARRICK HAMILTON: So let me begin with gratitude, gratitude for hosting this, and all the data and evidence that you and your team have been providing, where not only do you have critical administrative data, but you didn't balk on the question of race. You sought mechanisms by which you could deal with the controversies of some of these glaring disparities that you pointed out, as well as Seth.
[00:11:29.77] And then also, let me potentially embarrass one of my colleagues by wishing him a happy birthday. Today is Fred's birthday, so in this conversation we should acknowledge him and say happy birthday, Fred.
[00:11:45.79] FIONA GREIG: We'll save some time at the end to sing around for him. Thanks. That's awesome.
[00:11:51.25] DARRICK HAMILTON: All right. But so to think about this context of student debt, race, and political economy, let's consider some framing things first, which is the racial wealth gap. Let's consider investment aspects of debt more broadly, and then consumption aspects or the overall financialization of our economy that we're in when thinking about the context of debt. And then the question of authentic choice, or at the risk of being hyperbolic, of using hyperbole, are we in a sharecropping scenario where we burden people with debt in a way that is immoral, where they really didn't have choice. There really isn't any choice.
[00:12:40.09] And then thinking about our political economy, we need to think about the economics of it, the politics of it, the history of it. And then the other part of political economy that needs to be considered not as an issue but as a pillar, is racial stratification in America more broadly.
[00:12:58.99] And considering all of that, beginning with the unjust racial wealth gap, that clearly impacts the ability of Black families to be able to afford college and finance it without debt. If we consider the recent scarring in our economy from the last Great Recession, where we told Millennials in general to go to college and better themselves as they wait out of bad labor market, and saddled with debt. And then now, the prospects of jobs in a pandemic economy, where we know there will be additional scarring.
[00:13:34.48] If we consider the rhetoric in our political economy, particularly around race, where we enjoin Black people to take personal responsibility, where we tell them to stop making excuses, to study hard and work hard, then that is a notion of individual agency that people can actually affect their lot in life. And that's all framed in the notion of our cultural poverty thesis, which explains inequality based in choices as opposed to structures.
[00:14:06.52] What else do we know? We know that Blacks have a lower economic return to a college degree, that in comparison to whites, they get less labor market rewards, that they are less likely to have a home that appreciates at the same rate as whites. And here's the key feature. These racial disparities and outcomes, not only are they large and glaring, they rise with education. Health disparities rise with higher levels of education. A college degree for a Black person compared to a white person is associated with a 70% higher mortality rate between the ages of 25 and 64.
[00:14:48.44] Now granted, education leads to better outcomes regardless of race, but across race, they persist and they get wider. So my whole point in saying that is the rhetoric we, as a society, tell Black people that your pathway to success is you taking ownership in getting a college degree, but yet we reward it differently for Black people compared to white people.
[00:15:15.65] So in terms of debt, what we conceive of is good and bad debt needs to be reconceived when we consider racial context. And we haven't even talked a lot about for profit universities and their specific targeting based on race, and there's a lot of research on that. And Fred may actually talk about that. I'm not sure. So I won't spend a whole lot of time on it.
[00:15:41.56] But let me say and add some more statistics to those that Seth provided. Four years after graduation-- especially when we consider the political context of whether we should have partial debt cancellation, where many of the proposals say up to $50,000, versus total debt cancellation-- four years after graduation, the typical Black person now has student debt in the order of about $53,000 on average, which would suggest that there are many that have a lot more than $53,000. That's in comparison to about $28,000 four years after graduation for the typical white graduate.
[00:16:22.18] So debt is proportionately higher for Black students, and $50,000 would still leave a whole lot of Black people with debt. And then as it relates to whether Black people undervalue education-- and if it's not clear, I'm trying to make it clear that we as a society blame inequality on Blacks' attitudes towards education and self-involvement. But that's not even empirically grounded. We know that proportionately, Black students are over represented in graduate school. And that could be because if you know you're going to face discrimination, you might pursue a resume building strategy.
[00:17:03.97] So Black students tend to take on more debt at every level of education, and they're more likely to drop out of college or university because of financial burden compared to their white peers. And that's really bad. We saddle them with debt and not even a degree. And this occurs again at every level of education, whether we're talking about undergraduate or graduate. And this, again, fits into this notion of whether we should have partial or full cancellation. Some people argue that, well, for graduate education, should we be canceling it? And I say yes, full cancellation.
[00:17:41.50] So let me end with a couple of points about the racial wealth gap. So there are increasing arguments that full cancellation would actually exacerbate the racial wealth gap. Well, one, that's not clear. There's compelling evidence from scholars like Marshall Steinbaum which argues that full cancellation would reduce the racial wealth gap.
[00:18:05.79] But I think that that misses the point. If we're interested in relieving the racial wealth gap, the focus needs to be on assets. Assets count for far more from an accounting standpoint of the Black white racial wealth gap than does debt, whether it's student debt or any other form of debt. But the issue of debt is a moral dilemma. As I've been pointing out, if we're telling the population for social mobility, they need to go get a college degree, but yet we saddled them throughout their life course with this debt, then that's problematic.
[00:18:45.79] So to me, analogous to Medicare for all-- and I know Fred's going to talk about this to some extent-- we should remove the threat and burden of finance at the point of delivery of education, the point at which somebody is most vulnerable. So we should figure out pathways where college can be tuition-free, and we should pursue restorative justice by canceling all the debt because it's a moral issue. And that in and of itself is reason enough, in my view, that in the 21st century we should cancel the debt.
[00:19:25.04] FIONA GREIG: Thank you, Darrick. You gave us so much to chew on. Fred, birthday boy, happy birthday. I want to bring you into the conversation. And you've written so much on this topic, including Credit Where It's Due: Rethinking Financial Citizenship, The Oxford Handbook of Consumption, Money Talks. And I want to dig in further about this question of cancellation versus more targeted relief. Can you help us understand the pros and cons of targeted versus full? And actually, how do people, like real people in the world, experience these potential policy benefits?
[00:20:15.86] FREDERICK WHERRY: So thanks so much for pulling this conversation together. And let me just first start out by saying that as a sociologist, I get really enthusiastic when there is a puzzle like the one that we are about to see now. So it is possible that people might be doing better with whatever debt cancellation scheme comes to fruition, but feeling worse about it.
[00:20:48.22] And so what do I mean? So when people are experiencing these various types of transactions, it matters how the transfer happens. We take this for granted when looking at consumer studies of transaction utility. We no longer take it for granted when looking at how welfare recipients receive various benefits.
[00:21:11.13] And so my colleague Kathy Eaton and others have studied the earned income tax credit, and it really matters that when you get the earned income tax credit, it shows up at tax time so that you're treated like everyone else. You're able to maintain your sense of dignity, and you act with self-mastery in ways that you would not have had you received it in the more traditional forms that remind you that you are somehow less than other people.
[00:21:46.15] And so one of the things that worries me is as there are these discussions of targeted relief, are we then going to see a well-meaning government present a whole lot of hoops that might not seem like a whole lot of hoops to someone who is not already burdened by hoops. They have to jump through the hoops, demonstrate that they are sort of down and out. And if they're not down and out enough, they then have to turn themselves to cheats to conceal any sort of extra support they may be getting.
[00:22:24.72] And so it becomes one of these sort of really demeaning experiences. And so you're thankful that the debt, whether it's partial or full, has been relieved, but you may be feeling much worse about the manner in which that relief came. So if we're going to have a state in which we are privileging economic dignity going forward, then we have to really be very serious about not having people jump through these administrative hoops and being treated in the ways that welfare recipients typically have been treated.
[00:22:59.07] I think the last thing I'll say about this is the student debt, the student loans really have been a family affair in ways that we don't really talk much about. So on the one hand, it's a family affair in the sense of the types of support and from where the support comes, where the cheering comes from, everyone's really proud that their kid is going to college somewhere because that's what we're told we're supposed to do.
[00:23:32.97] And you're also told-- and this is a story I heard for many years growing up in South Carolina-- education is the one thing they can't take away from you. So you must get your education. It's the only pathway forward. And so you had for profits who were targeting these populations to say, look, here's a pathway for you. It's a little expensive, but it pays off. It pays off in the end. But it didn't.
[00:24:02.76] Now what my team did is we decided to kind of go look at the complaint narratives submitted to the Consumer Financial Protection Bureau. And we looked only at about 4,000 of these. We didn't have the benefit of the four million plus accounts at JP JPMorgan Chase Institute. But 4,000 is pretty good for qualitative researchers. And one of the things that became apparent to us is the extent to which of the entire family network starts to suffer. And the moment when these debtors cannot repay, they're starting to get phone calls. The parents are getting phone calls. The siblings are getting phone calls. They're getting phone calls at work. They're getting embarrassing phone calls sometimes to the employer.
[00:24:47.20] And there is a sense that even their standing within their families is now being jeopardized. And so the very networks that they depend on and the networks that help them get into higher education and support them throughout are now being threatened in the moment when they cannot repay. And now they are being sort of embarrassed at work and having their positions in the workplace somehow damaged.
[00:25:11.98] And so I just hope that as we think about the options going forward, that we don't make the mistake of saying, let's go through this process so that we can make sure that we're not wasting money on people who don't need it, and instead, start asking ourselves, how do we treat student debtors? How do we treat consumers with some modicum of respect so that whatever transfer is made at whatever dollar amount, that they actually experience the full utility of that transfer. Otherwise, what you're going to find is you're going to have people may be doing better, but they may also be feeling worse.
[00:26:04.28] FIONA GREIG: Wow. Thank you, Fred. Well, I want to bring the whole panel in now. And you've each given us such important pieces to bring together. But I want to bring us into kind of the current moment of COVID-19 and the CARES Act, which put borrowers in automatic forbearance, at least for federal loans, which is maybe one of the most aggressive policy changes impacting student numbers as of recently.
[00:26:37.83] And so how has COVID-19 and the CARES Act impacted borrowers and the policies you think we need to have put in place? And has it changed the conversation at all? And maybe, Seth, maybe you want to open and get us going here, but this is a question to the panel.
[00:26:57.45] SETH FROTMAN: So I think what we have seen is really aggressive action by the federal government towards student loan borrowers that is kind of unique. For those who don't know, of the $1.7 trillion in student loan debt, the federal government owns around $1.3 trillion. So it, in some regards, gives it a lot more flexibility in how it could act. Most of this debt hasn't been securitized on Wall Street. There's not a lot of the issues we saw during the last recession about write downs and the challenges of trying to provide relief for struggling borrowers.
[00:27:39.88] So Congress and then the executive branch stepped in to just cause people's payments, which has been successful. Allowing people not to pay their loans for now seven months, obviously, is an incredibly important intervention. But I think one of the things that scares me is pulling this Band-Aid off too soon or without larger structural change in the system.
[00:28:07.67] So very briefly, we've tried this before. When there is a natural disaster, the Department of Ed will essentially do the same thing, which is just pause people's payments and then decide that the exigent circumstances are gone and turn payments back on. And what we see in nearly every single one of those instances is a tremendous spike in delinquencies, distress, and ultimately default. And I am very worried about replicating this now on a scale of 40 million people.
[00:28:46.38] So the payment pause ends on December 31, and there is a chance that a very, very broken student loan industry is going to be forced to turn on and off, potentially under a new Biden administration, 40 million accounts, which is something that is particularly petrifying, I think, to anyone who's been watching this.
[00:29:08.85] And I think that's why you're hearing these calls for actually fixing the underlying system. And I think it's actually, if we get this right, a tremendous moment in time. If we could pair the pause in payments with fixing the underlying system, in terms of both the amount of debt that people might have if we're not going to get to full cancellation with the underlying problems we've seen throughout the sector, I think there's a chance to actually see some relief for the most vulnerable borrowers.
[00:29:40.47] And I think just one point to echo, we have tried targeted relief for student loan borrowers and targeted cancellation for two decades. And it's not going so well. There is targeted relief for public servants who are willing to give back to their community. There's a 98% default rate. There's targeted relief for people who get ripped off by for profit schools. Betsy DeVos is sitting on hundreds of thousands of their applications. There's targeted relief for people who become disabled, and there's hundreds of thousands of people who have essentially total and permanent disability who haven't gotten relief.
[00:30:16.71] So I think we should just go into the conversation eyes wide open with the idea that we have tried what people are arguing now under the auspices of better targeting scarce resources, not helping undeserving people, or I don't know, whatever they're arguing. But we should recognize that that has really failed the most vulnerable borrowers in the system.
[00:30:43.42] And again, I think there is this unique moment in time where we could-- I saw one of our favorite people on Twitter call this a my bad moment, where this is an opportunity for us to just look back and say we made a tremendous mistake, but this is our bad and we have the chance to actually fix it now. And I think that's something that we have to contemplate when it comes from public policy.
[00:31:13.13] FIONA GREIG: Fred, Darrick, are there other contributions? I'm particularly interested in you, as a sociologist, in terms of getting inside the mind and heart of borrowers during a pandemic. I'm not sure whether you have new data or new analysis in this time. But do you think it's created a change in the conversation, either with decision makers and policymakers? Or how does the pandemic lay on top of these financial challenges?
[00:31:47.53] FREDERICK WHERRY: Well, I think the one thing it's certainly done is we've had to do a pause without regard for whether or not we think people are deserving or undeserving because suddenly, by virtue of a pandemic that affects everyone, everyone somehow is worthy of some kind of regard. So I think that's a different place we've been in. It's not a place that history allows you to enter on a regular basis, thank goodness.
[00:32:20.83] But now that we're here, the question is, what will we do at the moment because it's a moment of disruption. And so we can either use it for some good or we can sort of go back to business as usual. Hopefully we won't do the latter. The other thing to sort of think through, too, is when people are talking about, so what are students doing with their money?
[00:32:48.08] And so one of the things that we don't pay enough attention to is the extent to which they're getting a lot of support from family when they're in college. But for some of the neediest students, they're also sort of, from time to time, sending support back home. And so it kind of breaks your heart, but you'll meet students who have done very well, gone to great places, and they will tell you about how $150 in a month was what it took to keep the heat going, or $200 to keep the heat going at their parents' house.
[00:33:25.48] And so when you see students who seem to be taking on too much of a loan burden, well, they're actually the ones who can get their hands on some money in ways that their families may not be able to. And so I think there's a dual conversation to be had about sort of how do you take an historic moment and do something that's going to be really transformative for people's lives? And then how do you sort of, as Seth pointed out, think about these underlying conditions that are creating these debt burdens in the first place?
[00:34:04.69] DARRICK HAMILTON: Along with cancelling student debt, we need universal Wi-Fi so people like me don't lose their internet connection. My little attempt at humor. But in all seriousness, this recession from this pandemic, along with considerations of race, call for us to do something, as Seth and Fred alluded to, which would be moral, just, and transformative. And student debt cancellation becomes a prime issue by which we could use to address that.
[00:34:42.16] And let me try to make the case with a few things. One is we've demonstrated a capacity. Perhaps some of the strong resistance from the Republican party with regards to the next CARES Act is the capacity that it demonstrates, the fact that we can spend $2.3 trillion on an economy and still not suffer all the hand-waving fears that people have with regards to stimulus spending, that we have monetary capacity to do these things and not collapse an economy. We can even think about that Trump tax cut in terms of capacity and what we can do.
[00:35:24.23] So government can do big, bold things, and we do have the financial capacity to do it. That's big, and that should not go unstated. There will be winners and losers. The Sanders group is pointing out some of the billionaire gains, but even aside from thinking about winners and losers, the capacity alone is enough reason to demonstrate that we can do this.
[00:35:47.59] And then the point I want to make also is that considering the returns of a college degree intersected with race and economic recessions, here's some things we know. We know that Blacks get a lower return from a college degree than whites. But what we don't all know, and what is also empirically true, that disparity rises during an economic recession. And this speaks to whether individuals have agency with regards to their lot in life, or whether they're structural impediments that, in an immoral and unjust way, imposed upon more vulnerable people differently than others.
[00:36:33.49] So if we're thinking about that and thinking about government capacity, then it is the right thing to do to at least alleviate some of that burden with debt cancellation.
[00:36:45.50] FIONA GREIG: Darrick, I want to stay with you for a minute because I think the three of you have invited us to use this moment for good, and to not just pause payments, but address the underlying structural issue here of student loan debt. And if I think about it in the most simple terms, there are kind of actually two huge problems. There is all of the debt, the stock of debt that represents the $1.7 trillion, that--
[00:37:22.51] DARRICK HAMILTON: The curse of the internet.
[00:37:28.12] FREDERICK WHERRY: I'm glad it's not me.
[00:37:52.54] FIONA GREIG: Speaking of internet issues. But I think you probably got my question. How do you connect these two? How do you think about these two problems distinctly or together?
[00:38:03.95] DARRICK HAMILTON: Actually, think we got you cut off when you were describing it. Remind us what are the two entities?
[00:38:08.80] FIONA GREIG: Yes, sorry. So problem one is the stock of debt that we have, $1.7 trillion. We could cancel that today, but tomorrow we would graduate a new class that has new debt. And so how do we think about problem one being all the debt that has accumulated today? And problem two is really the problem at its root, the rising cost of tuition, the lack of free higher education. That's the two-part problem.
[00:38:40.38] DARRICK HAMILTON: Yeah. I think that that's framed exactly right. And the way to think of it, in my mind, is K through 12. We made a decision in our American history to provide that in a public way without the burden of tuition and debt imposed upon people. At this point in the 21st century, college education is an enabling good, and it's an enabling good with regards to, perhaps, what our economy might require.
[00:39:09.37] But even beyond that, if we think about the consumption aspect of a college degree alone, the ability to synthesize big ideas, the ability for young people to engage in a social environment around intellectual thought, we can afford and should afford that to everyone without the stigma and burden of debt at the point of delivery of that.
[00:39:34.42] And this is building on what Fred described. Even if we think about saying, well, some can afford it, some can't, so why don't we use financial aid so that we can provide college degrees, college education for those that are poor? Be naive for us not to recognize that in the university apparatus, we know who the financial aid students are and who they aren't.
[00:39:58.86] And students already start using language around, I'm a paying customer. So should we treat those that get financial aid different than those that do get financial aid? In the 21st century, our economy should afford everyone the enabling good of a college degree. And I think, to me, that's the point.
[00:40:22.14] And then the second point is we should pursue restorative justice by canceling all that debt so that those that currently have the debt don't suffer it.
[00:40:32.94] And I'll say one last thing. Some people make the argument, well, all those people that take a college education, they're going to be upset. To me, that's a tenuous argument at best. It is a divisive argument. And it also is framed into this deserving and undeserving narrative that we ultimately need to transform from because it is holding us back as a society, period.
[00:41:10.69] FIONA GREIG: Fred? Seth?
[00:41:14.50] FREDERICK WHERRY: So I'm no theologian, but I do ascribe to grace. And so I think this is a moment where we can do two things. On the one hand in a way that does not mean existing debtors, we can provide enormous relief. We can also do some of the harder work of figuring out how do you make sure that going forward, financing is different? So if we don't have a full on system, should be some level of if I need to go to college, I can do so and not be in debt to go to college.
[00:42:02.73] The really wealthy schools with high endowments, I mean, I think they're going to be fine. But you need to be able to go to college. OK. So if you're going to college, and if you need some small financing, is there a better way to do it? Is there a more dynamic way to understand when borrowers are in distress?
[00:42:27.27] Can we better marshal big data to better understand who's more likely to be targeted for other types of financial products and services, because this is that moment where you're moving into adulthood, one of the things that we know is that a lot of middle class kids, getting the credit card, et cetera, getting into debt has become one of those ways in which they have been expressing their sense of adulthood because that's what adulthood looks like. It looks like someone who has a credit card and can rent a car.
[00:43:00.39] And so is there a better way, at this pivotal moment when people are moving from one life stage to the next, that we have up some guardrails, and that we have up some sort of basic provisioning so that we're not seeing people falling into the kinds of debt into which they have fallen? But I think one of the key things is just to practice a bit of grace and to say, there are people who are now suffering. We do not need you to perform your suffering for lots of different administrative hoops. We need you to just know that your suffering has been recognized. We've made some mistakes, and we can do a restart.
[00:43:40.51] SETH FROTMAN: And only a couple of things to add, which I probably can't say better than you guys I've already said. I think it's been interesting to watch something you've been working on for so long kind of get thrown into the public eye and, I think, get a lot of attention that it otherwise hadn't before.
[00:43:56.44] And some of the stuff that comes out is just so telling. I think you hear a lot, well, you shouldn't have taken on the debt in the first place, or some variation of that, which I think people are starting to realize is there are types of people who shouldn't go to school. I think that transition becomes very apparent.
[00:44:16.01] And I think it's, for a lot of us, pretty morally repulsive to see those arguments, which is the idea that this promise of a better life-- which who knows if it was ever right or wrong, but is a uniquely American point of view-- which this is the chance to democratize America, to see it kind of play out over social media and opinions talking about there are people who should go to school and who shouldn't. And we are OK with letting finances stand in the way, I think, is really stark.
[00:44:48.76] But one of the things that's fascinating to me, and somewhat optimistic, is when we first started talking about this, probably in 2011, and we started talking about people with student debt and the challenges they were facing, we would be screaming from the rooftops about the challenges that families and individuals were facing. And you would see this presented to policymakers and politicians, and they would kind of jump up and be like, we need to make college more affordable for the next guy. And they would pan to the borrower who asked the question. And they'd be, like, that does nothing for me at all. And the politician thought they gave they gave this great answer, but it was totally non-responsive to the plight of people who already had debt.
[00:45:31.63] And I think through fierce advocacy and organizing, you've seen this issue raised to the forefront, which is policy making just can't sacrifice a generation and try to fix it for the next person, and that if we are going to solve the challenges of student debt, we absolutely need to figure out what this looks like for next year's incoming class and the 10 years after that. But we just can't write off the 40 plus million Americans who literally have done nothing wrong.
[00:46:06.52] And I think just the last part of this, I read something funny, which is solving student debt isn't going to solve climate change or isn't going to deal with nuclear non-proliferation in America. But that's not a reason why we shouldn't do it. You see all of these amazing red herrings about tackling the student debt crisis isn't going to do, when I don't think it purports to actually say it's going to do that.
[00:46:28.93] What it is going to do is help millions of our fellow Americans, where the only thing that they did wrong was buy into this idea that you should take on debt to get a better life for you and your family. And if we could solve that, that is a tremendous amount of good we could do in just everyday people's lives.
[00:46:48.26] FIONA GREIG: Yeah. Here's to that. I think the notion that we're kind of pitting one generation of folks who have debt against another generation of folks who might yet take on debt is a false distinction. And as Fred said, it's a family affair. We see it very clearly in our data that 40% of people who are making payments didn't have any debt themselves. And then they're helping somebody else. And whether it's a parent helping son, grandparent helping grandchild, child helping parent, it goes in all directions. And so this is an intergenerational burden.
[00:47:30.97] One thing, just to bring us home with this conversation, is I want to turn to Darrick. And Darrick, I think you're probably sort of at the tip of the spear in terms of what might be around the corner. Give us juicy intel in terms of what is a Biden administration considering? What's in the realm of consideration? How are they thinking about doing it? And how are you weighing in on this?
[00:48:06.90] DARRICK HAMILTON: So I'm not so sure I'm the person in the room where it happened. But I can report on some of the issues that we're seeing in the press, and then the joint task force meetings we've had with the Biden Sanders group.
[00:48:26.04] Seth is right. This is a hot button issue that is at the forefront of what we can consider. Even with the question of whether there's going to be a Democratic Senate or not, there's a whole lot that we can do with student debt. Even the Trump Administration has demonstrated this. Betsy-- I'm missing her-- forgot her last name. There were some instances when she canceled some debt for certain individuals and entities. So I think the question of is there capacity to do it by executive order, I think there's precedent, and there are legal scholars beyond my pay grade that have made the argument.
[00:49:12.57] Indeed, Elizabeth Warren and Chuck Schumer as well as Bernie Sanders have been advocating that this is something that the Biden administration can do by executive order. I think the Biden administration, the incoming administration, they have been clear that they are willing to spend as it relates to addressing the pandemic even beyond the constraints of concerns around [INAUDIBLE], being able to appropriate new spending in a way that would be through deficits.
[00:49:50.58] My own opinion is one that we have grossly overstated the burdens of deficits particularly in this current context with low inflation and the cost of the federal government to borrow, the rate at which we can borrow compared to the rate at which we can grow. So I don't think that's even a binding constraint. But basically, I think this will be a hotly debated issue, and those that are in advocacy positions, I would encourage you to, if you're supportive of the idea, advocate. Advocate in a way that we can't use the Senate, whether it's Republican and Democrat, as an excuse for us not getting this immediate relief.
[00:50:35.78] FIONA GREIG: Thank you. Fred, Seth, anything to add?
[00:50:41.90] SETH FROTMAN: So I'll just jump in really quickly on this. So I think it's exactly right. I think there are incredible levers that the incoming administration could use to do a whole lot of good for a whole lot of people. I think that there are proposals out there to wipe out $10,000 or $50,000 of debt for every borrower with a federal loan that I think are the ones that are taking a lot of promise now.
[00:51:11.34] But one of the things that I've been working on for years is there are also other programs on the books where Congress looked at the growth of student debt and realized it was a tremendous problem. And they put in place a range of programs from public service loan forgiveness to protections for borrowers who went to predatory schools to disabilities, you name it.
[00:51:40.07] And when you look at this system, Congress actually contemplated that we were going to cumulatively wipe out debt for tens of millions of people under these programs. Obviously these are many different Congresses. But if you look at the totality of the United States government, they actually looked at the tremendous growth of debt-fueled higher education and realized that there needed to be safety valves for millions of people, not to reduce their debt, not to shrink it, but to literally wipe out debt for millions and millions of people.
[00:52:13.76] And these programs have been broken nearly since they've been put in place. They've been broken because of mismanagement at the Department of Education, because of a very, very poorly run student loan industry. And so on top of the broad base forgiveness, I think the incoming administration has a tremendous ability to fix these other programs as well, not just for the next group of people, but again, in a restorative justice sort of way, for the teacher who gave back 10 years under the promise that her loan would get forgiven, to actually have the federal government fulfill that promise. For the borrower who was ripped off by a predatory school, to forgive their loans as they were promised.
[00:52:57.35] And I think through both of these efforts, through even the $10,000 amount the Biden administration has proposed, and by fixing both of these programs, I think that the executive branch has all of the authority they need to probably wipe out the student debt for half of all student loan borrowers in America if you combine all of these two programs.
[00:53:22.34] And then I think it's our job to imagine how you make the system work for the rest of the folks. Again, I think that half number is premised on the Biden $10,000. Obviously that could go higher or lower. But I think it just goes to the point that there are tremendous tools. And I think the question is whether we are going to harness the powers inherent in government that Congress granted to the executive branch for this exact moment, for these exact borrowers, and actually use them the way they were intended for the very first time.
[00:53:56.97] FREDERICK WHERRY: And I will just add very quickly that we have an opportunity now to stop asking why voters vote against their interests, and why they don't understand all the good that the government's doing. We have an opportunity now to actually sort of redesign how good services and good programs are delivered, and to see it in real time so that people can not only be better off materially, but they can also feel that their economic dignity is being affirmed, and they will feel as if they're also much better off by the policy.
[00:54:39.34] FIONA GREIG: Well thank you, all three of you. Thank you. Big round of applause to my panelists, Fred, Seth, and Darrick. And happy birthday to Fred Wherry. And thank you, everyone, for joining us for this important conversation. We really look forward to connecting again soon. And thanks for paying attention to the work of JPMorgan Chase Institute and these great scholars Thanks so much.
[00:55:05.80] FREDERICK WHERRY: Thank you.
Fiona Greig, Director of Consumer Research at the JPMC Institute, opened the discussion by describing the economic impact of student loan debt, which exceeds $1.6 trillion for borrowers in the U.S. collectively. She pointed to Institute research which has shown that while most student loan borrowers are not unreasonably burdened by student loan payments, a large number of borrowers still struggle to keep up payments, and those borrowers are already economically vulnerable: lower-income, older, and especially Black borrowers. Additionally, the economic impacts of student debt extend to a broader portion of the population than previously thought: almost 40 percent of individuals involved in student loan repayment are helping someone else pay off their student loan debt, with most helpers holding no student loan debt themselves.
Frederick Wherry, Darrick Hamilton, and Seth Frotman shared insights from their research and the policy implications in this panel, moderated by Grieg.
What else do we need to understand about the context and policy landscape?
Frotman spoke to the speed and scale at which student loan debt has risen over the last ten years — an increase of 110 percent — and the disparities in debt burdens that disproportionately impact some particularly vulnerable groups of borrowers. For instance, borrowers over the age of 50 owe more than three times the amount owed by younger borrowers; while Black borrowers owe nearly 50 percent more than their white peers upon graduation. Invoking research from the Institute on Assets and Social Policy, Frotman noted that the median white borrower will have paid 94 percent of their student loan debt twenty years after college enrollment. Yet, the median Black borrower still owes 95 percent of their student loan debt over the same period of time.
How does student loan debt impact college accessibility and racial disparities?
Darrick Hamilton discussed the impacts of the racial wealth gap on student loan debt. Student loan borrowers have been saddled with debt, he said, and many are still recovering from the last economic recession. More significantly, Black student loan borrowers tend to owe more at the four-year mark after graduation — an average of $53,000 — compared to an average of $28,000 for white borrowers over the same time frame.
Hamilton noted that Black student loan borrowers are also more likely to drop out of college due to the financial burden, making it even harder to afford payments that typically begin after graduation. Many borrowers are unable to reap the economic benefits of seeking higher education whether or not they earn a degree.
What more can we learn about how people experience debt relief?
Frederick Wherry discussed the idea of targeted debt assistance for some student loan borrowers. Wherry drew parallels to public welfare benefits and services — iterating that an individual’s experience with debt relief and the mode of delivery could be key factors in enabling a borrower’s sense of dignity. Too often, people seeking public assistance may feel they are forced through hoops, or rigid bureaucracies, and forced to present their suffering to get help. While targeted student debt relief may improve the financial health of its recipients, policymakers must also be careful to consider the mode of delivery to preserve each individual’s sense of dignity.
How has COVID-19 made this worse? Has the CARES Act started a new conversation?
Panelists also described the potential for policymakers to consider new ways forward given the availability of data. The COVID-19 pandemic has highlighted the pervasiveness and burden of student loan debt. The CARES Act, signed into law in March of this year, provided payment forbearance for student loan borrowers. With the CARES Act ending in December, the panelists emphasized that policymakers have the opportunity to consider new guardrails and supportive measures to prevent forthcoming borrowers from falling into the student debt trap and may consider options for debt relief. Let data coupled with compassion have the last say, Wherry ended.
We are grateful to the panelists for their expert insights and perspectives, which are invaluable as we navigate the road to financial health and economic recovery.