Lawmakers like U.S. Rep. Rashida Tlaib have proposed that helping Detroit and the rest of the country should include student loan debt relief. Credit: Shutterstock

The coronavirus pandemic has affected people all worldwide and has killed more than 171,000 people in the United States alone. Aside from the sometimes permanent health issues the virus can and has caused people, the financial impact of the pandemic is a problem that the federal government has yet to completely solve. 

Detroit is no stranger to the physical harm caused by the virus, which has killed more than 2,800 in Wayne County, but the city has also felt the sting of the economic fallout of the pandemic. In April, 1 out of 4 Detroit workers was out of a job either temporarily or permanently, according to data from the U.S. Bureau of Labor Statistics.

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Gov. Gretchen Whitmer’s stay-at-home order, Centers for Disease Control guidelines for safely operating businesses, and increased health screening at several businesses in the city were all put in place to keep people physically safe. But what has been done to help Detroiters who are struggling financially? 

Some lawmakers have proposed that helping Detroit and the rest of the country should include student loan debt relief. Democratic U.S. Rep. Rashida Tlaib of Michigan, who recently won a primary challenge from Detroit City Council President Brenda Jones, has co-sponsored two bills that aim to give loan borrowers varying degrees of relief.

One is the Student Debt Emergency Relief Act, which seeks to help loan borrowers in the wake of the economic fallout from the coronavirus pandemic. 

The Student Debt Cancellation Act of 2019, which seeks to completely forgive outstanding federal and private student loans, was drafted in 2019, before there were any confirmed cases of COVID-19 in the country, Tlaib said that now is as good a time as any to remind people that it exists and is waiting for action from the Senate before it moves forward. 

How much would such a program really help a city like Detroit? The short answer is that it might not directly impact enough Detroiters to fix the growing wealth gap or fully address the economic problems that exploded during the pandemic but relief is necessary. 

Detroit Future City, an independent think tank and public policy advocate, released a report in 2017 that estimates only about 13 percent of Detroiters have a bachelor’s degree or higher, compared to the national average of roughly 30 percent. Additionally, 26 percent of Detroiters have finished some college but don’t have a four-year degree, according to the report. 

Tlaib says there is value in investing in higher education, which will improve economic growth and create opportunity for Michigan and the nation. 

“This is them improving our economy with that kind of challenge of refueling various job sectors and, to me, that is an investment our federal government should be involved in, that we cover and support people seeking higher education,” Tlaib said. 

Helping student loan borrowers is a form of “tax relief,” said Tlaib, who also says the debt hamstrings families. 

“You’re going to see homeownership increase, people being able to invest in and start businesses and the like,” she said. “I have residents who literally won’t even start a family until they’re done paying off their student loans. It’s really paralyzed a lot of my families in the 13th district.” 

People want to make more money and advance their career, says Edward Lynch, senior program manager for the Center for Equity, Engagement and Research at Detroit Future City. 

“Broadly speaking, higher education results in better employment outcomes. For instance, people with higher degrees are much more likely to have higher starting salaries and a more steady income. So people want to get their degree to get better job opportunities,” Lynch said. 

Wiping out debt could help the local economy, say experts like Lynch. The average cost to attend a four-year college, before financial aid, is about $35,209 a year. 

Despite the fact that the majority of Detroiters don’t have a bachelor’s degree — wiping out debt — would allow the ones who do to keep more of their income, said Lynch.

“There are people spending 300-plus dollars a month on loan debt. That’s every month for years and years. That same money could go towards a down payment on a house or a business,” he said. 

But eliminating student loan debt might not actually be the best solution for a city like Detroit, according to Kevin Stange, an associate professor of Public Policy at the University of Michigan who teaches graduate courses in higher education policy, economics and quantitative methods. 

Stange says the racial disparity in people who default on their loans is something Detroiters and lawmakers should take note of. In 2017, the Center for American Progress reported that nearly half of African-American borrowers defaulted, including 75 percent of those who dropped out of for-profit colleges. Detroit is the Blackest major city in America per capita, with about 80 percent of its residents identifying as Black. 

Stange also believes resolving student loan debt across the board does more to help people who don’t really need the help than it does to address people who have a hard time repaying it. 

“Disproportionately, the people who have a lot of student loan debt are just fine, or are doing very well. They are the people who went to medical school or law school or went to an expensive college and now are in a position to realistically pay off the debt,” Stange said. 

Stange argues that loan forgiveness programs should focus on people who didn’t earn a degree but still racked up moderate amounts of debt — which he says is $5000 to $8,000 — who are struggling to pay it off and are considering defaulting on their loans. 

“I come at this with the idea of: How do we help those who are in the biggest risk of defaulting? That should be our primary question. Some targeted loan debt relief for people with modest amounts of debt, like say $6,000, would go a long way in doing that,” Stange says. 

Borrowers who default on their loans face challenges including lowered credit scores, added difficulty in taking out car loans or renting apartments, and even more difficulties finding and keeping employment. Additionally, borrowers who default are ineligible for receiving federal aid. 

In addition to providing relief to borrowers with modest amounts of debt,  the federal government should increase the prevalence of income-based repayment plans, Stange says. He says those programs would be the most effective way to directly help the people who are struggling with student loan debt the most.

What do you think about wiping out student loan debt? Should the federal government have a responsibility to provide an affordable and quality education? Do you have student debt? How have you been paying it off? Let us know your thoughts on Twitter @BridgeDet313. Don’t forget to subscribe for more content like this! 

Bryce Huffman is a reporter for BridgeDetroit. He was formerly a reporter for Michigan Radio, and host of the podcast, Same Same Different.

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