The Progressive Ensign

insights and analytics to build an economy that works for all

Category: Student Debt

Millennials Left Out of the Economic Boom

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On March 18, 2019

In Capitalism, Democracy, Millennials, Student Debt, Uncategorized

Image: fee.org

Millennials have seen the lowest level of GDP growth of three major generations since WWII.  Baby Boomers, Gen X enjoyed GDP growth rates of between 30 – 40 % in the ten years after they turned 18 years old.  While, Millennials experienced half those GDP growth rates .

Sources: Commerce Department, The Washington Post – 3/15/19

To gain entrance to good jobs, Millennials became the most educated cohort in America’s history – yet at a price.  Student debt is at an all-time high of $1.5 trillion. This debt level has caused at least 400,000 potential young buyers of homes to be left out of the housing market in 2014, according to Federal Reserve economists.  One reason students needed to take on such massive debt loads is states for the past 30 years have been drawing down their financial support of college education by between 60 – 50 %.  Universities were left no choice to fill the funding gap except by raising tuition. 

We have documented in previous posts that real wages for the 80 % in income group have been basically stagnant for the last 30 years.  As the nation’s top 20 % gains 90 %  of the income and wealth gains since the Great Recession, Millennials have been further challenged to keep up, particularly if they have no college education living in inner cities and Midwest rural regions.  The hallowing out of manufacturing in the Midwest and South has produced low wage, low benefit, limited future jobs for young people. Add the slow Internet infrastructure and lower quality healthcare makes the future look dim.  Is it any wonder that the Heartland has the highest opioid death rate in the country?

Millennials feel their lack of an economic future in other ways, delaying marriage by 8  to 10 years and having children 5 – 6 years later than other generations.

Next Steps:

A whole generation has been missing out on the benefits of the fastest growing wealth generation economy in the world.  As income and wealth goes to the top 10 % to the highest level of concentrated wealth since 1929, the education services that make for a broad based pluralistic economy have fewer student slots and extremely high tuition.  Corporate and wealthy individual taxes are at the lowest levels in 50 years.  Our higher education system is turning into a grinder for people of modest means, carrying a heavy burden of debt for young people to begin their careers and families.

The number one issue for Millennials is student debt.  We need as a country to deal with this problem.  Students did not withdraw support for state colleges and universities, taxpayers and state governments did withdraw financial support with huge consequences for our young people and our economy. There have been a variety of proposals to reduce student debt including, forgiving debt completely, or forgiving debt for service to the country (as a proposal we made in a post to focus on investing in our Midwest communities), require corporations to provide more training for employees, and corporate support of a national apprenticeship program at a funding level and quality of Germany’s apprentice program for non – college careers.

The key is we need to end the bickering between conservatives, independents and liberals and take on the economic challenge of huge debt that our young people have today.  Certainly, these people need to take responsibility for their own economic future, but we who created the present economy of winners and losers need to do better by our young people or when they gain positions of economic power we may not like the economic system they setup.

Higher Ed Fading for Low Income Students

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On November 6, 2018

In Apprenticeship, Student Debt

(Editor Note: Insight Bytes focus on key economic issues and solutions for all of us, on Thursdays we spotlight in more depth Solutions to issues we have identified. Fridays we focus on how to build the Common Good. Please right click on images to see them larger in a separate tab. Click on the Index Topic Name at the beginning of each post to see more posts on that topic on PC or Laptop.)

Photo: qz.com

Public colleges and universities have been the foundation of our society opening new opportunities for better lives, careers and mobility for students at all income levels.  Yet, for low income students the dream of a higher education degree and a better job is fading fast.  A non- profit research organization, New America, just released a report noting how low income students continue to struggle with the rising cost of education. It is true that the cost of higher education for all students has accelerated, in particular since the Great Recession. However, for lower income families the price increases have been especially acute.

Sources: New America, U.S. Department of Education – 10/31/18

The cost for low income students rose by at least $1000 in four years from the 2010 – 2011 to 2015-2016 periods for about 50 % of the public universities in the study. The report further notes a disturbing trend:

“The number of public universities that charged in-state freshmen with family incomes of $30,000 or less at an average net price under $10,000, has fallen from 361, or 62 percent of the schools examined, to 279 or 48 percent.”

Students at all income levels now carry a debt load of over $1.5 trillion dollars – the highest debt load recorded over the past twenty years.  This debt is keeping students from being hired if they have a poor credit record, purchasing a home or moving out from their parents’ home to an apartment.  New household formations are continuing to decline over the past 5 years. Unlocking the potential of our students to ensure they can begin their careers and families with a good financial start is crucial to the long term economic growth of our country and the happiness of our young people.

Next steps:

We believe that education in the U.S. is actually the Fifth Estate after The Press, and the three major branches of federal government.  We noted our concern about access to education in June post, “Funding Education to Common Good Levels Will Increase Prosperity and Reduce Civil Conflict.”  The National Center for Children in Poverty estimates that 40 % of all children aged 12 – 17 years old in the U.S. or 9.7 million are living in low income families.  This is a huge number of our young people not reaching their full potential while we miss their contributions and boost to our economy.

In that post we observed funding needs to be at magnitudes greater than today to make up for almost a 50 % reduction in state funding since 1975:

“The key factor in how well education is building the common good across all income levels is funding.  Since 1975 funding by state and local governments for higher education has dropped from 60.3 % to to 34.1 % in 2010. The last eight years has seen this figure continue to drop close to 24 %. Public colleges and universities have coped with the unprecedented drop in state and local funding by raising tuition year after year to the point where students are now carrying the highest level of student loan debt ever at $1.5 trillion. Families can’t keep up with the tuition increases.”

We saw federal funding as necessary to balance the inequity across states:

“Total education US federal funding accounts for only 14 % of education spending vs OECD countries where national general funding is allocated across regions at 54 %. “

Or New America recommends that all federal higher education programs be combined together to support families and students based on a families’ ability to pay for their child’s higher education:

“At New America, we have also offered a much more ambitious approach. In our 2016 report Starting from Scratch, we proposed replacing the country’s federal financial aid system—Pell Grants, federal loans, and higher education tax credits—with a new federal-state partnership program that would eliminate unmet financial need for all students. Instead, the price students would pay would be limited to their Expected Family Contribution, the amount the government determines a household can afford to contribute toward the education of their children. Federal, state, and institutional funds would make up the difference between students’ EFC and the net price at the participating institution. “

We need high quality alternatives to a college education as well.  A study by the National Center for Education Statistics showed that 46 % of low income students did not attend college, many for financial reasons but also due to lack of interest or to start working.  From all income levels many high school graduates are not interested in a traditional college education, we need an empowering and certified apprenticeship program along the model that Germany has established to better meet the needs of corporations and give all non-college graduates opportunities for a well-paying job and career.

We as a society need to take responsibility for providing an education framework, access and funding so that all citizens can learn, progress and contribute fully to our society. Certainly this is the essence of a democracy our founding fathers envisioned of a well-educated citizenry building our country and economy that works for all.

Household Debt Continues to Mount – Students Staggered by Debt

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On August 15, 2018

In Consumer Squeeze, Household Debt, Student Debt

(Editor Note: Insight Bytes focus on key economic issues and solutions for all of us, on Thursdays we spotlight in more depth Solutions to issues we have identified. Fridays we focus on how to build the Common Good. Please right click on images to see them larger in a separate tab.)

Photo: commondreams.org

U.S. household debt is up as families are caught between soaring debt and stagnant wages.  We have noted how wages have been wiped out by inflation in the latest Bureau of Labor Statistics report comparing July of 2017 to July of 2018. The Federal Reserve of New York and Equifax have tallied the last figures on household debt in the charts below.

Sources: Federal Reserve of New York, Equifax, The Wall Street Journal, The Daily Shot – 8/15/18

Student Loan debt continued to increase while credit card, auto and other debt held steady.  The reduction of financial support by state and federal government to higher education is appalling.  Before the Great Recession public funding for higher education was at 50 % still a drastically less then funding in the 1970s.  Now, public funding for higher education is at 35 % leaving universities with no choice but to raise tuition.

Source: kypolicy.org

Public college tuition and fees costs (in 2015 dollars) have almost tripled since 1975, so students needed to borrow money to complete their education.

The student loan predicament is a national disgrace.  It exemplifies how poorly we as a society have supported the higher education.  Our young people are looking to start families and looking to purchase homes yet, they are not moving ahead.  The birth rate is at the lowest level it has ever been in this nations’ history and the number of millennials purchasing homes is a the lowest level it has been since before the Great Recession. Without the younger generation purchasing homes the second stage economy supported by new household formation fades.  The markets for appliances, furniture, home repair and remodeling, carpeting and many other household product sales will fall.

Next Steps:

We said in our blog of May 29th the student debt problem is so great that it is hurting the formation of new households:

“In 2003, 42 % of people under age 35 owned a home now only 35 % own a home.  The dream of owning a home is slipping away as our society allows the rich continue to enjoy huge tax reductions in the most recent tax bill, with continuous lack of state funding for colleges and universities and then a paucity of forgiveness programs for graduates.”

Sources: Federal Reserve Bank of New York, US Census Bureau, New York Times – 5/29/18

Further we outlined some recognition of the student debt problem but much more needs to be done.

“As part of the spending bill that Congress passed last month, $350 million was allocated for a fix it forgiveness program for some types of student loans.  Senator Elizabeth Warren has been surveying the issue and individuals trying to take advantage of the provisions where she found that it was quite complex, answers were in complete from the Department of Education and work still needed to be done to setup the process. She found many firefighters and teachers having a difficult time getting into the program.  Prior to passage of the spending bill Senators Whitehouse and Kaine wrote a bill to setup a student debt forgiveness program and get it funded, their bill set the stage for Democrats to push for provisions of the bill to be included in the omnibus spending bill.

This solution is still not enough compared to the huge issue of $1.49 trillion outstanding placing an anchor of debt on our young people when they need to be investing in starting their families and careers and buying homes. In blog of February 16th in our archives, we review an idea to cancel all student debt.  We like the idea moving forward, yet recommend that forgiveness be done in stages, by reducing interest rates, offering Heartland Service, providing a universal national service option and corporate sponsorship of an internship by the student.”

It is unacceptable that our Congress and Executive branch are focused on how to give more money to Corporate Nation States and The Elite, they should be representing us and focusing on how to solve the student loan crisis and create opportunities for our young people and our country.

The Rich View Our Government as A Trusted Rule Keeper, The Common Man Not So Much

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On June 15, 2018

In Common Good, Corporate Nation State, Environment, Executive Compensation, Labor, Stock Buybacks, Student Debt, Worker Wages

Image: Your Little Planet

Thomas Jefferson and James Madison saw the need to frame a government such that ‘forced compromises’ would push political leaders to focus on the Common Good.  The institutions that maintain our common good include the federal government three estates:  The Supreme Court, Congress and The Executive.  In addition, the Fourth Estate, a Free Press is crucial for our citizens to have access to fair and impartial reporting about the activity of government officials and their policies. We have spotlighted the key role Education, as the Fifth estate, plays in educating our people to make critical decisions and understand comprehensively the information they receive from a Free Press.

Trust in our federal government has been falling since the presidency of Lyndon Johnson in 1965.

Source: Pew Research Center – 12/14/17

We noted in our first post on the Common Good that there were two factors contributing to the decline in trust:

“We see two major factors for the lack of trust.  One, is that economic inequality has been increasing over the last 60 years to the point where it is at the worst it has ever been since 1929.  Americans expect their government to be the rule keeper of a fair shot at economic opportunity not a bastion for the rich and powerful.  As wealthy donors have taken over control of both major parties, the influence of the average citizen has been reduced to nearly nothing except at the ballot box – but not in legislative policy.”

The second major factor is the change in information access and news viewing habits of our society.

“In the 1950s and 1960s families gathered around the television set to watch Walter Cronkite or Huntley and Brinkley bring them the news for the day.  These news anchors had teams of trained journalists in how to gather news, provide airing of opposing views and investigation to reveal the facts of the story. As cable news programs became popular people drifted away from central network journalist supported news programs toward popular ‘viewpoint news’ programs like Fox News or CNN.  Then, from 1995 until today, the Internet was a catalyst for the growth of blogging, and ‘friend news’ on Facebook which had virtually no formally trained journalists and limited understanding of the difference between facts and opinions.  Opinions spread virally through the Internet often with no foundation in formal fact gathering or fact finding investigation techniques. Today, we even have presidential spokespersons talking about ‘alternative facts’ to justify their policies or opinions.”

Trust gaps by income level are increasing around the world with many developed countries showing double digit gaps between the top income quartile and the bottom income quartile and the U.S. with the largest gap:

In the U.S. incomes for the lower 80 % have been largely stagnant for the past three decades since the Reagan years, higher education costs rising to levels never seen before with student loan debt at $1.5 trillion dollars. In short, lower and middle income parents expect their children to have fewer opportunities and to make less money over their lifetime. This growing sense of hopelessness is in part triggering the populist movements we see world-wide. The top quartile trust government institutions the most because they are getting the benefits, tax cuts, relaxed environmental policies to allow their businesses to make as much money as they can, and continued stock buy backs to make even more money instead of increasing worker wages.  Workers see their votes not making a difference as Congress is at the beck and call of Corporate Nation States who make multi-million dollar campaign contributions and the Executive Branch now run by billionaires.

Little wonder the Common Good is not embraced by all people, for the rich they are on top of the economic pyramid. The rich get the laws they want and aren’t interested in sharing their wealth or time to build the Common Good.

Here is what will likely happen, in the end the rich will need to see that it is in their interest to build the Common Good, by contributing to our institutions of government and common people or they will lose what they already have and probably a lot more.

Millennials Buried in Student Debt Can’t Buy Homes!

By

On May 29, 2018

In Housing, Millennials, Student Debt, Wages

 

Student debt has soared to $1.4 trillion in the last month according to the Federal Reserve.  Now millennials are faced with a combination of soaring student debt and high home prices are giving up on owning a home.

Sources: Federal Reserve Bank of New York, US Census Bureau, New York Times – 5/29/18

In 2003, 42 % of people under age 35 owned a home now only 35 % own a home.  The dream of owning a home is slipping away as our society allows the rich continue to enjoy huge tax reductions in the most recent tax bill, with continuous lack of state funding for colleges and universities and then a paucity of forgiveness programs for graduates.  The lack of household formations, now at a low point since the Great Recession means that durable orders will fall and sure enough durables (ie. appliances, furniture, cars) orders have fallen recently.  As millennials and working class are squeezed between stagnant wages and rents, college debt, car loan payments, and credit card payments:

Source: Bloomberg, The Wall Street Journal, The Daily Shot – 5/29/18

Next Steps:

We saw this problem getting worse in our blog last April and suggested several solutions related to student debt forgiveness and interest reduction programs:

“As part of the spending bill that Congress passed last month, $350 million was allocated for a fix it forgiveness program for some types of student loans.  Senator Elizabeth Warren has been surveying the issue and individuals trying to take advantage of the provisions where she found that it was quite complex, answers were in complete from the Department of Education and work still needed to be done to setup the process. She found many firefighters and teachers having a difficult time getting into the program.  Prior to passage of the spending bill Senators Whitehouse and Kaine wrote a bill to setup a student debt forgiveness program and get it funded, their bill set the stage for Democrats to push for provisions of the bill to be included in the omnibus spending bill.

This solution is still not enough compared to the huge issue of $1.49 trillion outstanding placing an anchor of debt on our young people when they need to be investing in starting their families and careers and buying homes. In blog of February 16th in our archives, we review an idea to cancel all student debt.  We like the idea moving forward, yet recommend that forgiveness be done in stages, by reducing interest rates, offering Heartland Service, providing a universal national service option and corporate sponsorship of an internship by the student.”

Our ideas stand today, as they did six weeks ago as Congress, the Elite and Corporate Nation States continue to ignore the fact that we are not doing right by our young people entering the economy and starting their careers.

Consumers Squeezed Between Debt and Stagnant Wages

By

On May 8, 2018

In Consumer Squeeze, Debt, Employees, Executive Compensation, Low Income Finance, Student Debt, Wages

 

Image: americanprogress.org

The Federal Reserve just reported that consumer debt related to auto and student loans are at the highest level they have ever been since 1970 (2nd chart).  As we have noted wages have stagnated since the Great Recession with 90 % of the income gains going to the top 10 % in income.  The middle class has been left out of the mainstream of the economic recovery over the past 10 years.

Sources: The Federal Reserve Bank – St. Louis, The Wall Street Journal, The Daily Shot – 5/8/18

While revolving debt from credit cards has fallen (top chart) since the recession, non revolving debt for autos and student loans has soared.   Consumers are caught in a squeeze between debt and flat wages.  The Commerce Department reported on 1st Quarter GDP noted that consumer spending had decelerated during the quarter.  Sentiment surveys have also shown a reduction in buying plans due to trade issues and any benefit from the tax cuts being lost due to rising prices from tariffs.  Banks have posted 7 straight months of an increasing percentage of charge offs on bad loans where consumers are not making payments on non-mortgage debt.

As interest rates go up, payments grow larger per month, with the added tightening of increased prices.  The middle class is caught trying to maintain their standard of living by borrowing money to mitigate flat wages.

Next Steps –

There are two sides to the squeeze – increasing wages and reducing loan payment size and principal.

We have endorsed Sen. Cory Booker’s bill called the Worker Dividend Act to share billions of dollars in stock buyback dollars 50/50 with employees.  We see a need for incentives for employers to share management extreme wealth now at 300 times average worker salary with the line staff.  Or if they can’t do it with incentives we like the City of Portland’s plan to require corporations share their funding above the 150 times level with employees. In our blog about why Wages Are Stuck we outline a series of steps including: placing workers on Boards, ending outsourcing overseas, end H1-B low wage visas, allow repatriated funds be brought back to the US only for wages, productivity or training investments, end stock buybacks and raise employee wages with the funds, breakup anti-competitive oligarchies of huge corporations to create more competition and jobs, balance the recruiting and hiring process for candidates, and offer incentives for employee training and development.

On the loan side, we recommend that student loan rates be brought back to reasonably fair rates as a percentage of the Fed Funds rate, and offer a series of forgiveness programs for universal service, community teaching and caregiving.  For auto loans, we request that the Consumer Finance Protection Bureau evaluate major bank auto loans to ensure they are fair and do not have hidden fees or unusual interest rate riders.

At Last Some Relief On Student Debt

By

On April 6, 2018

In Solution, Student Debt

 

image: seiu668.org

Student loan debt continues to mount as the Federal Reserve reported a major increase to $1.49 trillion in February of this year. But, a partial solution is coming.

Image: The Federal Reserve Bank,  St. Louis – 2/8/18

As part of the spending bill that Congress passed last month, $350 million was allocated for a fix it forgiveness program for some types of student loans.  Senator Elizabeth Warren has been surveying the issue and individuals trying to take advantage of the provisions where she found that it was quite complex, answers were in complete from the Department of Education and work still needed to be done to setup the process. She found many firefighters and teachers having a difficult time getting into the program.  Prior to passage of the spending bill Senators Whitehouse and Kaine wrote a bill to setup a student debt forgiveness program and get it funded, their bill set the stage for Democrats to push for provisions of the bill to be included in the omnibus spending bill.

This solution is still not enough compared to the huge issue of $1.49 trillion outstanding placing an anchor of debt on our young people when they need to be investing in starting their families and careers and buying homes. In blog of February 16th in our archives, we review an idea to cancel all student debt.  We like the idea moving forward, yet recommend that forgiveness be done in stages, by reducing interest rates, offering Heartland Service,  providing a universal national service option and corporate sponsorship of an internship by the student.

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