This story is a part So, moneyan online community dedicated to financial empowerment and advice, led by CNET Editor at Large and host of the So Money podcast, Farnoosh Torabi.

For now, the Biden administration’s plan for student loan relief on pause. Unfortunately, it was blocked by a federal appeals court hearing allegations from six Republican-led states that the plan is illegal and would deprive state-owned lenders of profits.

This is just one of the many setbacks and objections the student debt relief program has faced in recent weeks. In another lawsuit that was dismissed, a conservative legal group in Wisconsin targeted the White House for saying the plan could reduce the racial wealth gap and improve racial justice, arguing that the government had “improper racial motives “.

Really?

And all this political backlash is only partial relief for some borrowers. Imagine the uproar if all student debt was eliminated or if higher education was made free.

But this column isn’t about how I want the naysayers to buzz. Instead, it’s about how, once this interim order is dismantled, we can best focus on fixing our broken US higher education system, starting with a focus on the most financially vulnerable and penalized of all borrowers: black Americans .

The nation’s $1.7 trillion student debt crisis places a disproportionate burden on black borrowers because of the racial wealth gap. On average, black families have about eight times less wealth than white families, and black students borrow $25,000 more for college.

Because of greater financial need, black people take out more loans with the hope that they will pay off when they get a job after graduation. But the effect is cyclical—higher loans mean they pay more compound interest over time, and because they earn fewer dollars than their white counterparts, they have a harder time paying back their loans than other groups (this is especially true for private loans, which can have higher interest rates than federal loans and minimal consumer protection). A 2019 study by Brandeis University found that 20 years after first enrolling in school, the average black borrower still owes 95% of their original student debt. And according to the Brookings Institute, there are three times more black borrowers than white borrowers.

Moving forward, we must focus reform on racial inequality. By doing this, we have a better chance of helping not only this core group of struggling borrowers, but also everyone else who has been sold fake bills — by school counselors, lenders, college administrators, and most of all, our elected leaders — about the reality of an expensive degree. college.

A system where people are not burdened with student debt will benefit everyone. “Higher education today is as basic as elementary or secondary education,” Brookings Metro senior fellow Andre Perry told The Current in an August interview. “Society needs its population to be more educated. And that’s why we need a system that treats him the same way.”

Why and how student debt reform should move forward

The administration’s loan forgiveness plan is an effort in the right direction. It promises to cancel up to $10,000 of federal student loan debt for borrowers earning less than $125,000 a year (or $250,000 for married couples), or up to $20,000 for low-income Pell Grant recipients.

But as my recent So Money guest Peter Dunn, a chartered financial planner, said, “This is essentially a short-term solution. It doesn’t address the underlying problems in the US higher education system.”

Most importantly, policy and finance experts say the move isn’t enough to really help close the racial wealth gap. In my podcast conversation with Gene Lee, president of the Minority Corporate Lawyers Association, we discussed the impact of student debt on blacks and marginalized groups. “The federal government is really disproportionately taking advantage of black students because they tend to take out larger amounts of loans than any other group,” Lee said. “There is definitely an opportunity for the government to make a big difference.”

Read more: Student loan debt is crushing the financial dreams of millennials

Carl Romer, a former Brookings fellow who co-authored the study with Perry, Student Debt Cancellation Should Consider Wealth, Not Income, told me in an email that based on their findings, “the more student debt that is canceled, the stronger the improving effect it will have on the racial wealth gap.”

For the current generation of borrowers, more debt forgiveness would be better, but where to next? How do we ensure that the next prospective college student doesn’t borrow more than they can afford to get a degree that won’t necessarily land them in a well-paying job? How do we avoid the next generation being crushed by the burden of a lifetime of debt due to skyrocketing tuition fees?

If our goal is to level the playing field, here are some ways policymakers can reduce the racial wealth gap and address what has become a major social and economic crisis in this country.

Eliminate interest

The first step Lee proposed was for the administration to eliminate all interest for black borrowers. “Compound interest really adds up,” she said. One study by JPMorgan Chase found that 13% of black borrowers may never pay off their loans because the added interest keeps them from repaying the principal. Combine this with the general increase in the cost of living and the fact that black students face pay discrimination, making upward mobility even more out of reach.

Rising interest rates have a long-lasting negative effect on wealth inequality. I found one analysis that shows how a borrower with a $28,000 federal loan balance and 5.8% interest would pay an extra $80 a month, which means if the interest was eliminated, they could save about $9,000 over the course of decade. Imagine if someone could put that money into a retirement fund or instead it could go towards a down payment on a house.

Consider wealth, not income

To qualify for the current debt relief plan, borrowers must earn below a certain income threshold. But how much someone earns — without any context of their financial obligations, generational wealth, or the total amount of debt they have — is an arbitrary metric.

In my podcast, Lee made an effective argument that student debt collection should not be based on income. For example, if someone earns more than the $125,000 income limit, that doesn’t mean they can afford to pay off their debt, especially as inflation continues to make it harder to buy the things they need. Additionally, the post-graduation reality is different for marginalized families. She noted that Asian Americans, Black Americans, Latinos and Native Americans often have more than one generation in the home, supporting not only their own family but also their aging parents. “What if you have three generations living in the house and you’re the sole breadwinner or everyone relies on you?” Lee put.

Student debt cancellation reform should consider wealth, not income, according to Perry and Rohmer. “Policy should be judged by its expected impact on people of different levels of well-being,” Romer told me. “Because black families have less wealth than non-black families, they are less able to cover the costs of higher education. This contributes to black students dropping out of college for cost reasons and makes it more likely that black families will receive student loans with no corresponding increase in income,” Romer said.

For context, more than half of black families with student debt have zero or negative equity. The underlying problem is that black people are more disadvantaged economically, with less intergenerational wealth due to a history of discrimination. This means that black students with debt are less likely to surpass their parents’ generation in net wealth.

Expanding access and funding for public colleges

While higher education is still associated with higher lifetime earnings, the equation is not as straightforward for black borrowers. The idea that a degree will “pay off” is more dubious if you still face discriminatory barriers in housing, employment and other areas after graduation.

Private institutions are on average about 282% more expensive than public institutions. But many community colleges are subsidized, making them inexpensive alternatives, and an associate’s degree often serves as a stepping stone to a bachelor’s degree elsewhere. Perry argued in The Current that subsidies already in place in the public sector should be expanded to make the cost of attending four-year public universities free.

Ultimately, tuition reform should make public college degrees more financially affordable, eliminating the need for black students—and all students—to take out loans in the first place. And it would mean that young people, especially from the most disadvantaged groups of the population, would no longer be penalized for wanting to improve their education.

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