About half of all Latino student loan borrowers are expected to have their entire debt forgiven under the plan announced Wednesday by President Joe Biden.
Following up on a campaign promise, the Biden administration is canceling up to $10,000 in federal loan debt and an additional $10,000 if the student was a Pell Grant recipient. Those eligible to qualify must earn less than $125,000 or less than $250,000 for couples filing taxes jointly.
The federal loan forgiveness is expected to significantly impact Latinos who carry a larger student debt burden.
Among Latino undergraduate students who began their postsecondary education in 2012, 51% borrowed funds to pay their undergraduate or graduate education, according to Excelencia in Education, one of the nation’s leading educational think tanks focused on Latino college completion.
The initial $10,000 of federal student loan forgiveness will allow about half of all Latino borrowers to have their entire debt forgiven, according to Excelencia.
Carlos Vera, 28, co-founder and executive director of Pay Our Interns, graduated with a bachelor's degree in political science from American University in May 2020. It took him almost 10 years to complete his degree. His federal and private loans have followed him since.
"At one point, I was paying up to $900 a month — especially the private ones, because the interest does accrue pretty quickly," Vera, who owes $40,000 in federal and $20,000 in private loans, told NBC News.
"$20K will be very helpful," said Vera. "That means long term, I'm paying less — and then the second thing is it makes me feel a little bit better about potentially like, you know, going to grad school, or doing other life decisions that I probably couldn't beforehand."
Of those Latinos who have borrowed to pay for college, 23% took out loans under $10,000 and 26% received loans of between $10,000 and $50,000.
Almost 7 in 10 (67%) Latino student borrowers have educational debt, according to the Education Data Initiative. Thirty-three percent of Latino borrowers said they put off marriage and 37% delayed having children because of their student debt.
“Most Latinos in postsecondary education come from low-income households and are the first in their families to go to college, often at the cost of enormous financial sacrifices from them and their family,” Janet Murgía, president and CEO of UnidosUS, the nation’s largest Latino civil rights and advocacy organization, said in a statement.
A little more than half of low-income Latinos surveyed in Arizona, Texas and California indicated they were the first in their families to take out student loans, according to a UnidosUS study released this week.
Of the 1,200 Latinos surveyed across the states, 38% said they owe an average of $17,000; 42% reported that they have defaulted on their student loans at least once.
Biden also extended the payment pause on federal student loans one final time through 2022 and set a cap repayment of 5% of one’s monthly income.
According to Excelencia in Education, Latinos are more than likely than their non-Latino white counterparts to default on their loans — 35% compared to 20%. The rate increases by 5% for those who didn't complete their degree. Those with a bachelor's degree still face a default rate two times higher than their white peers in part due to the difference in earnings among all bachelor's degree graduates.
The Education Department is expected to release information on steps eligible applicants can take to receive the loan forgiveness, which will be based on income in the 2020 or 2021 tax year.