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STUDENT LOAN DEBT

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DEBT FOLLOWS STUDENT

Student Debt

GRAPHIC DESIGNED BY ARIEL MELENDEZ

WRITTEN BY ARIEL MELENDEZ

A student loan is designed to help students pay for their college education in regards to their tuition, books and other living expenses. There are many different types of loans that students can take out.

The United States Department of Education has two different federal student loan programs. Some of the direct loans include:

“Because I do have a lot of students who borrow loans, not for educational expenses because they’re not exactly considering the fact that hey, this refund check looks great now, but four years from now, what is it going to look like,” Tori Weigant, assistant director of financial aid at West Chester, said in regards to students loans.

The dramatic increase in wealth inequality has contributed to student loan debt. The higher education system itself is full of racial and class disparities, from enrolling to college to paying for it after you graduate.

One of the biggest effects that wealth inequality has on education is regarding students’ choices and decisions that need to be made when it comes to paying back their student loans.

Having a system in place to keep track of the loans is the best way to stay on top of and avoid falling behind on payments, or even worse, debt. Shannon Doyle, a financial counselor with Lutheran Social Service in Minneapolis, said keeping a spreadsheet with your loans is the best way to stay on top of them. She also believes that schools should be more upfront about what students owe.

“There should be no barriers to students knowing how much they have borrowed,” she said. 40 million students now have at least one outstanding student loan.

Borrowers are typically carrying roughly four student loans each and the average balance of these loans is up to $29,000. This has pushed student loan debt to over $1.2 trillion. To go along with this, about 51 percent of Americans with student loans are either falling behind or not making expected payments.

Susan Dynarski, professor of education, public policy and economics at the University of Michigan, is among many who have proposed ideas to help students post-graduation. Her proposed reform deals with income-based repayment requirements.

“The idea of income-based repayment is that if people roll the dice and try out college and if it doesn’t work out well, they essentially don’t pay back the loans.”

In Dynarski’s proposed plan, she mentions how having income-based repayment systems that include adjustments in bills and the length of the payment schedule can help reduce the pressure that falls on borrowers.

The debt that students come out of college with also greatly affects the choices they can make once they graduate. It can affect decisions such as the type of career they can have, putting off marriage and even starting a family. American Student Assistance was a part of a study that looked at how students were affected by student loan debt. Seventy-three percent of the respondents said that they had put off saving for retirement and other investments. Seventy-five percent said that student loan debt affected their decision or ability to purchase a house.

Student loan debt can affect students and their families in many different ways. Students realize that they can’t really begin the life they imagined after graduation until they pay back the loans that got them through school.

In the end, it all comes back to wealth inequality because that affects the money that families have and what forces them to take out a student loan in the first place.

EMPLOYMENT

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WRITTEN BY AMY HELD

Savings, retirement accounts, home ownership and all other financial assets add up to create wealth. When you take a deeper look at wealth inequality in America, it becomes quite obvious that a disparity exists by gender and race.

Income inequality affects wealth inequality because, over the course of a lifetime, lower earnings make it much harder to save and accumulate assets or wealth.

Women are affected in a big way by this disparity. According to the Bureau of Labor Statistics, in 1998 women ages 45 to 54 earned 70.5 percent of what men made and women ages 55 to 64 made 68.2 percent of what men made. Since 2004, women’s earnings have been anywhere from 80 to 83 percent of men’s earnings.

Women are still lagging behind, making it very difficult, especially for single mothers, to save, purchase a home or prepare for retirement.

The disparity of wealth is also obvious by race as a whole. A 2013 report from the Urban Institute revealed that whites have seven times more wealth than African Americans and six times more than Hispanics.

African Americans and Hispanics own a much smaller percentage of homes in the U.S., have less money saved and less in retirement savings. Over a lifetime, the average white person makes $2 million, African Americans $1.5 million and Hispanics $1 million.

Lower earnings lead to less savings, making it less likely to have a 20 percent down payment on a home.

According to the same Urban Institute report, African American families average more student loan debt than white families. When you combine this with a lower graduation rate for African Americans, the result is less wealth accumulation.

Wealth is a necessity for everyone to have economic security  and to be able to move up the economic ladder. Women need to be paid equally for doing the same job as a man and people of color, coming from a disadvantage, should be given the opportunity of low cost education and lower interest/down payment home loans in order to lessen the wealth gap.

JOB CREATION

WRITTEN BY AMY HELD

Jobs in the U.S. are affected by taxes, regulations, international trade and politics/special interests also play a role in their survival and creation.

A research study presented by the National Bureau of Economic Research regarding what types of businesses create the most jobs revealed the younger companies are, the more jobs they create.

The problem with startups is they typically last about five years. As a result, those new jobs are lost. The fact is, according to NBER research, startups make up three percent of employment, but almost 20 percent of gross job creation.

Erik Hunt, a senior human resource executive, co-founder and managing partner of the HuntRoman Group, said they provide virtual human resource support to small- and medium-sized businesses.

Hunt goes on to say, “Small businesses are burdened with this kind of taxation, regulation over and over and it only gets harder when politicians think there’s a revenue stream that isn’t there.”

If our system is set up to overtax and overregulate small and new businesses, it would seem they are being set up to fail. The system is then hindering job creation.

The solution here is to change tax policies and government regulations burying small and startup businesses in order to stimulate job creation.

International trade has a big effect on jobs. There has to be a balance between imports and exports and if the balance is off, there can be a trade deficit. In 2015, the U.S. partnership with Trans-Pacific countries created a trade deficit and cost the U.S. 2 million jobs.

The solution is to give both foreign and U.S. companies the incentive to keep and bring their factories to the U.S. Tax incentives and less regulations will play a big role in keeping and attracting new companies to the U.S., thus creating more jobs.

If politics plays a strong role in job creation, are the priorities or special interests of politicians overlooking the public’s health/safety, opportunities to create jobs, stimulate the economy and reduce the wealth gap?  

Scott Shipe, a project manager for the Frederick County Government in Maryland and the government affairs chair for both the Chesapeake Water Environment Association and the Chesapeake Section American Water Works Association, said the U.S. has been given a grade of D minus from the American Society of Civil Engineers for not keeping up with the ageing water infrastructure. The U.S. spends $38 billion annually on water and sewer band-aid repairs.

According to Shipe, the average age of pipes in the U.S. is 70 to 80 years old and there are 1,200 utilities east of the Mississippi River that are way over 120 to 130 years old. The life cycle of most pipes is 50 years.

Seven water agencies sent letters to Congress and senators on the budget and finance committee that stated, “Investments in the water and wastewater infrastructure provides significant economic benefits to our communities. The U.S. Department of Commerce estimates that each job created in the local water and wastewater industry creates 3.68 jobs in the national economy and each public dollar spent yields $2.62 in economic output to other industries.”

They estimate that it will take 25 years to replace our nation’s ageing water infrastructure at a cost of $1 trillion. Shipe said, “A $100 million project is significant and it would take thousands of people and involve about 50 to 60 industries.”

This would create thousands of blue collar jobs, and white collar jobs as well.

In 2014, the Water Infrastructure Finance and Innovation Act was passed. Because WIFIA is a loan program at treasury rates, it results in no long-term net cost to the Treasury or U.S. taxpayers.

Shipe has been going to D.C. for 14 years, lobbying and sitting in on analysis and finance meetings that determine where EPA funding will be spent. Due to the political makeup of our country, Shipe does not see a big movement to make these repairs.

Repairing and replacing our nation’s water infrastructure is a necessity and would create thousands upon thousands of jobs. The solution here is that the U.S. government should make the investment in public safety to stimulate the economy and job creation.

Tax incentives, lessening regulations, balancing trade in our favor and investing in water infrastructure are all solutions to creating new jobs in the U.S., thus reducing the wealth gap.