Joe Biden with students Ninety percent of Black students and 72 percent of Latino students take out loans, compared to 66 percent of white students.
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The Democrat says he will fund his ambitious proposal by rolling back President Donald Trump’s $2 trillion in tax cuts.

With a Republican-controlled Senate, student debt cancellation didn’t appear to be in the cards anytime soon. But a Democratic takeover of the Senate following the November election could be a huge game-changer for students saddled with loans they struggle to pay off for years on end.

 Joe Biden, the presumptive Democratic presidential contender, has announced a plan that aims to reduce racial disparities in higher education.

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This is of special interest to Latino and Black students, who according to a June 2020 report from the consumer advocacy group Student Borrower Protection Center, are more likely to take on student debt and struggle to pay it back at higher rates than their white counterparts.

Generational Racial Inequalities

The numbers speak for themselves: 90% of Black students and 72% of Latino students take out loans, compared to 66 percent of white students. On average, the median Latino borrower still owes more than 80% of the student loan balance 12 years after graduating, compared to the median white borrower who owes 65% in the same period, according to the report. And while 20 years after starting college the median white borrower has paid down almost 95% of the balance, the median Black borrower still owes 95% of the initial student loan balance.

“America’s Student Debt Crisis is a civil rights crisis,” the report contends. That’s because according to the report’s analysis, racial disparities begin long before a promissory note is signed.

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“From the start of borrowers’ lives, these disparities are spurred by the racial wealth gap,” it argues.

Breaking the Vicious Cycle of Debt

Biden’s plan for reducing student debt borrows from Senators Bernie Sanders and Elizabeth Warren’s proposals. Besides a flagship proposal of making public colleges and universities free for families with incomes below $125,000, the Democrat’s plan includes:

  • Forgiving all undergraduate tuition-related federal student debt for those who make up to $125,000 a year, attended two-year and four-year public colleges and universities, historically Black colleges and universities, or underfunded minority-serving institutions. This is an idea Biden adopted from Sanders after the Vermont senator ended his run for the candidacy.
  • Canceling a minimum of $10,000 of student debt per person, a plan the ex-vice president borrowed from Sen. Elizabeth Warren. He has also endorsed and adopted Sen. Warren’s plan to change the personal bankruptcy laws to make student loans dischargeable.
  • Suspending monthly payments and interest of those earning less than $25,000 per year, as well as capping payments at 5% of discretionary income for the rest.
  • Forgiving the remainder of loans after 20 years, with no tax burden.
  • Federal loan forgiveness of up to $50,000 over five years for those who participate in public service.

Where the Money Comes From

Biden says he will fund his ambitious plan by rolling back Trump’s $2 trillion of “excess business losses” tax cut in the CARES Act, which overwhelmingly benefits the richest Americans.

“We’re going to use that to reduce student debt,” Biden said in June, promising the implementation of his plan would turn America into “a different country.”