The Asset Building News Week is a weekly Friday feature on The Ladder, the Asset Building Program blog, designed to help readers keep up with news and developments in the asset building field. This week's topics include higher education, the American Dream narrative, inequality, financial products, and poverty.
We hosted an event this week to coincide with the Department of Education’s announcement of a College Savings Account Research Demonstration Project within its GEAR UP program. Martha Kanter, the Under Secretary for the Department of Ed, and Representative Chaka Fattah, the legislative architect of the GEAR UP program both spoke, alongside a panel of experts on college access and affordability. Martha Kanter was also quoted this week in a PBS piece looking at the increased student debt load and the rise in student loan defaults. She specifically drew attention to the cuts states have made in their higher education budgets. Meanwhile, the Washington Post reports that: “Nearly 30 percent of college students who took out loans dropped out of school, up from fewer than a quarter of students a decade ago.” Relatedly, the Seattle Times featured an op-ed advocating for increased investment public higher education. GOOD Magazine reports on a newly formed community college coalition aimed at building political advocacy around higher education. The Department of Ed also released a statement on a project to help school districts support their students as they fill out FAFSA forms. "If students don't think they can pay for college, they won't apply for college. Giving more young people access to the tools they need to apply for federal student aid is a key part of our strategy to make America number one in the world for college graduates by 2020." said U.S. Secretary of Education Arne Duncan. Americans need all the help they can get when it comes to finding money for college. As Education News reports, 62% of Americans had no idea what a 529 plan was, according to a survey of 1,000 people done by Edward Jones. “The survey found that awareness of 529 plans had a direct correlation with the wealth level of the respondent. Respondents making sub $35,000 a year had a 27% identification rate, 57% of those making $75,000 to $100,000 knew what the plans were while this figure rose to 62% for those making more than $100,000 a year.” This is not surprising, given that the tax benefits of 529s accrue primarily to high income people with higher marginal tax rates. Ideally, the launch of the college savings demonstration project within GEAR UP will spur attention to college savings innovations for lower-income Americans.
The American Dream
NPR has been doing a series of interesting pieces looking at different aspects of the culture, politics, and economics of the American Dream. All are worth a look. Links and a quote from each are below.
- American Dream Faces Harsh New Reality (May 29) - "Lower income whites and lower income African-Americans are more skeptical about the American Dream. Higher income blacks are pretty optimistic about the American Dream, as are higher income whites."
- With The American Dream Comes The Nightmare (May 30) - “What makes the American strand of human aspiration uniquely American, says Meyer, is that belief that a person can be "self-made," that one can transcend one's appointed rung on the ladder of society as determined by class, gender, birth order, inherited vocation and religion.”
- Obama's Own Story Defines His American Dream (May 30) - "I stand here knowing that my story is part of the larger American story. That I owe a debt to all of those who came before me. And that in no other country on Earth is my story even possible." – Barack Obama
- Right Fears Entitlements Are Killing American Dream (May 31) - "Democrats [are] very optimistic about the country's future, even though they're not as optimistic that every individual has it in their power to get ahead. Republicans believe in that aspect of the American dream — that hard work will pay off — but they're very skeptical about the way the country is headed as a whole."
We hosted an event this week on income inequality (video footage here). Bryce Covert at The Nation has a piece that resonates with Tim Noah’s assertion that income inequality hurts the foundations of American democracy. She points out that higher income people vote in higher numbers, face fewer barriers in getting to the polls, and are able to invest financially in advocating for policies that concern them. Advocates typically focus on the impact inequality has on people at the lower-end of the income spectrum, but writing for Vanity Fair, Joseph Stiglitz explains that: “The evidence from history and from around the modern world is unequivocal: there comes a point when inequality spirals into economic dysfunction for the whole society, and when it does, even the rich pay a steep price.” Sorting out the solutions to inequality in a politically viable manner is no easy task (as both David Corn and Timothy Noah highlighted in their remarks at our event).
A new UNICEF report on child poverty came out this week that shows the United States in an unfavorable light compared with similarly situated countries. The Toronto Star laments the Canadian child poverty rate, which while much better than the U.S. rate, is still cause for great concern. In response to the report, members of the Canadian Parliament are forming an Anti-Poverty caucus to build political consensus on solutions to child poverty. WNYC has a map of child wellbeing in New Jersey that shows the geographic trends of poverty and its correlates, such as inadequate transportation options. Speaking of maps, Grist reports that poor neighborhoods are visible even from space, due to the correlation of greater tree coverage in high-income urban areas compared with low-income areas.
If you want to catch up on some of the current discussion on the issue of prepaid cards, Martha White at TIME Moneyland has you covered. The Center for Responsible Lending also has prepared remarks about prepaid cards that offer an additional perspective. Jennifer Tescher and Rob Levyfrom CFSI have a piece in American Banker looking at a range of technology-based approaches to meeting the financial needs of low-income consumers. Finally, an op-ed from the New York Times Editorial Board makes the case against using credit scores to screen job applicants. As they point out, “credit-history screening can also lead to discrimination against minorities, who have historically been targeted for predatory lending practices that made them more vulnerable to default and blemished records.” This is despite the fact that frequently “damaged credit is the result of a layoff during the recession, divorce or a catastrophic illness.”
- Politico has an opinion piece on the challenge of bridging racial divides, which are increasingly generational divides.
- Reuters reports on research that looked at residential segregation and found it to be stubbornly persistent. “Researchers who analyzed the mobility trends of more than 100,000 families in metropolitan areas over nearly three decades found that the majority of blacks and whites continue to live in neighborhoods with high concentrations of residents of their own race.” One researcher notes that “The dominant mode is moving within racially stratified neighborhoods. And this is a problem because the effects of segregation are so insidious in terms of racial differences, access to quality schools, racial and ethnic differences in exposure to crime and pollution, and racial and ethnic difference in terms of concentrated poverty.”
- Colorlines reports on the latest lending discrimination lawsuit. Following a two and a half year long investigation of over 850,000 home mortgages, “The Justice Department announced SunTrust Banks Inc.’s mortgage-lending division would pay $21 million to settle charges that borrowers were charged higher fees based on their race or national origin between 2005 and 2009.” Specifically, “SunTrust Mortgage’s regional retail offices and national network of mortgage brokers engaged in a pattern or practice of discrimination that increased loan prices for many black and Latino borrowers.”
- Suzy Khimm at the Washington Post uses a chart from the Center on Budget and Policy Priorities to illustrate that “If the cutoff for tax breaks is $1 million instead of $250,000, Pelosi’s proposal would lose the government $366 billion in lost revenue over the next 10 years.”
- Demos has a new report that looks at the obscurity of fees in 401(k) plans and how these fees can erode retirement savings.