July 7th 2023.
The Supreme Court's decision to block President Joe Biden's student loan forgiveness plan has created a major wealth-building obstacle for Black Americans, according to finance expert Dr. Tisa Silver Canady. This means that millions of borrowers will not be able to take advantage of the proposed $20,000 per eligible borrower relief plan, and will instead be forced to start repaying their loans in October 2023.
According to TIME, approximately 7.5 million Black Americans have student debt. Dr. Canady, an author, collegiate financial wellness expert, and advocate specializing in student debt, believes that this relief plan would have been beneficial to many. It would have provided an immediate boost in net worth and decreased debt-to-income ratios that lenders use to evaluate creditworthiness for home and auto loans. It would have given borrowers more disposable income and made freedom from debt permanent for millions.
Dr. Canady has already helped borrowers delete over $8 million in debt since 2022 and will be featured in a new book written by Deborah Owens, author of Wealth Secrets. The book will discuss how Dr. Canady helped a Black woman student loan borrower wipe out $92,000 of debt last year.
When asked how this decision affects Black Americans' ability to build wealth, Dr. Canady pointed out that even though white borrowers outnumber their Black counterparts, Black borrowers typically borrow larger amounts and experience greater difficulty in repayment. This is partly due to the persistent wage gap that affects Black women the most, as well as their tendency to pursue advanced degrees leading to elevated levels of debt.
Dr. Canady recommends several tips to help Black students manage their student loan debt. First, they should take inventory of their loans at studentaid.gov and take note of their servicers. They should also look at their repayment plan and determine if it is affordable. If not, they should contact their servicer to discuss their options, including income-driven repayment plans. Those with non-Direct Loans should consider consolidating them through studentaid.gov by 12/31/23 to get the greatest benefit towards cancelation.
For those in default, they should look into the Fresh Start Initiative at studentaid.gov. It provides an easier-than-usual path towards good standing and away from collections activity. Those who work for the government and some nonprofits may be eligible for Public Service Loan Forgiveness, and those who pay using IDR plans may have their debts canceled after 20 or 25 years of repayment.
After the Supreme Court's decision, President Biden presented some new alternatives that could help Black American students. The White House plans to begin with a public hearing in mid-July to determine the issues to be addressed, and rulemaking sessions will happen this fall. The new repayment plan, SAVE, offers a more affordable payment plan, which borrowers can get more details on at studentaid.gov.
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