Robert Smith’s generous decision to pay off the student loans of the Morehouse College class of 2019 shines a welcome light on the unique barriers facing black students. But even if this gift turns out to have a significant impact on many of its recipients, it should not serve as an example for broader debt forgiveness policies.
Because Morehouse students are far from a representative sample of all borrowers, the impact of this act of generosity cannot be easily generalized to a broad public policy. Comparing these graduates’ outcomes with those of the class before could reveal the impact of loan forgiveness on these particular students. But that would not, as some observers have suggested, make it a natural experiment for predicting the impact of a national policy of loan forgiveness.
Student debt is a bigger problem for African Americans than for other students
Almost all the graduates who will benefit from Smith’s gift are black men, and about half of them come from families with incomes low enough to qualify them for federal Pell grants. They are among the most vulnerable populations and those for whom student debt is most likely to create real hardship. But within this group, they are relatively privileged, graduating with bachelor’s degrees from a prestigious institution.
African American students are more likely to borrow than students from other racial and ethnic groups pursuing similar types of degrees and are more likely to borrow relatively large amounts. Only 14 percent of black 2015–16 bachelor’s degree recipients graduated without debt, compared with 29 percent of four-year college graduates overall. One-third of black graduates borrowed $40,000 or more, compared with 18 percent of all bachelor’s degree recipients. The patterns were similar among those who earned associate degrees and certificates, although the numbers are smaller.
Moreover, black four-year college graduates default at five times the rate of white graduates—21 versus 4 percent. Morehouse graduates do better, but they still struggle more than typical bachelor’s degree recipients.
But students who earn bachelor’s degrees are less likely than others to struggle with debt
As black men who disproportionately come from low-income backgrounds, Morehouse graduates are more likely than others to struggle with student debt, but as bachelor’s degree recipients, they are among a group for whom loans will typically turn out to be a particularly good investment. A startling two-thirds of black male borrowers default on at least one of their student loans within 12 years of starting college, but the 25 percent default rate for black men with bachelor’s degrees is slightly lower than the overall rate for all borrowers.
Even if the outcome of this loan forgiveness “experiment” could be generalized, it will take years to know the full impact of the Morehouse gift. We cannot wait that long to address the pressing issue of how students of limited means finance college and how we protect students against unmanageable debt.
The problem of scaling debt forgiveness
As Urban Institute researchers have noted, the benefits of loan forgiveness under most national plans would accrue disproportionately to households in the upper half of the income distribution. Most of the lowest-income Americans do not have a college education so do not hold student debt. Those in the upper reaches of the income distribution are most likely to have borrowed significant amounts to pursue graduate and professional degrees.
Outstanding student debt now totals about $1.5 trillion. Paying off all debt for borrowers would cost taxpayers more than 50 times the amount the federal government is spending each year on Pell grants to help low-income students pay for college. It would cost 20 times the amount of covering full tuition and fees at current prices for all undergraduate students enrolled in public two- and four-year institutions across the country.
About half of the students who enroll at Morehouse leave without a degree. Better funding for this class as they were beginning their college careers might have reduced the number of students who left school for financial reasons and allowed others to focus more on their studies and less on the financial pressures facing them and their families.
It is one thing for a philanthropist to help a select group with whom he identifies and whose lives he can improve. It would be another thing entirely for the taxpayers to bestow significant benefits on a segment of the population that excludes those who have never had the opportunity to go to college and those who worked their way through without borrowing. Policymakers do have to think about the most equitable and efficient uses of taxpayer funds.
Mitigating the problems of student debt for African American students—particularly for students who enroll in college, borrow, and never manage to earn a credential—should be high on the national agenda. But this will require targeted policies that increase educational opportunities and improve outcomes for students facing a range of social and academic barriers. It will not require the kinds of blanket policies that are likely to disproportionately benefit the already privileged.