One reason Philadelphia will benefit from student loan forgiveness

Posted by City of Philadelphia on September 20, 2022

There are many reasons most Americans support student loan forgiveness and easing the repayment of loans. One that should be more widely celebrated is that it’s an investment in equity and opportunity.

As of President Biden’s announcement last month authorizing student loan forgiveness of up to $10,000 and up to $20,000 for Pell Grant recipients, roughly one in three borrowers had federal balances under $10,000, and 53 percent of borrowers had balances of less than $20,000. That means that the forgiveness will have a significant impact on most student loan borrowers. But it’s not just important because of how many people will be impacted, who specifically benefits is significant too, particularly in our city. In Philadelphia, in neighborhoods where the median household income was less than $50,000, the median student loan balance was less than $20,000, making the impact of student loan forgiveness most felt in those communities where budgets are stretched thin.

Due to centuries of systemic racism that have driven significant racial wealth gaps, Black student loan borrowers are more likely to have higher student loan balances and higher monthly payments than their counterparts. In fact, 20 years after first enrolling in school, the typical Black borrower still owed 95 percent of their original student debt compared to 6 percent for a white borrower, according to a 2019 study. This means Black students who attend college typically have less disposable income to purchase homes, start a family, and invest in their children’s education, which continues a cycle of debt. That makes the President’s elevated forgiveness of $20,000 for Pell Grant recipients particularly important to closing the U.S. racial wealth gap since Black students are twice as likely as white students to be the recipients of Pell Grants and 93 percent of all Pell Grant recipients come from households making less than $60,000 each year.

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