Posts Tagged ‘education’

Chart of the day

Posted: 13 September 2014 in Uncategorized
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According to the latest figures from the Federal Reserve Bank of New York, student debt is an enormous burden on people—both young and old.

There are now more than 2 million Americans age sixty and older who still owe money on their student loans—three times the number as recently as 2005—and they owe almost $20,000 per person, as a result of paying for their own education or for the college degrees of one or another family member. As Elizabeth Olson explains, the student-loan payments for the elderly are being automatically deducted from the Social Security income.

“As the baby boomers continue to move into retirement, the number of older Americans with defaulted loans will only continue to increase,” Charles A. Jeszeck, the G.A.O. director of education, work force and income security, testified at the hearing. “This creates the potential for an unpleasant surprises for some, as their benefits are offset and they face the possibility of a less secure retirement.”

More than 80 percent of the outstanding balances are from seniors who financed their own education, the G.A.O. report concluded, and only 18 percent were attributed to loans used to finance the studies of a spouse, child or grandchild.

But the default rate for these loans is 31 percent — a rate that is double that of the default rate for loans taken out by borrowers between the ages of 25 and 49 years old, according to agency data.

“Such debt reduces net worth and income and can erode retirement security,” Mr. Jeszeck said. “The effect of rising debt can be more profound for those who have accumulated few or no financial assets.”

And such student loan debt “can be especially problematic because unlike other types of debt, it generally cannot be discharged in bankruptcy,” he added.

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Of course, the student debt of the elderly makes up only a small portion of the enormous debt based on student loans for the population as a whole: as of the end of 2012, almost 40 it was almost 40 million borrowers has racked up a total of almost $1 trillion—an average of almost $25 thousand per person—in order to pay for a college education in the United States.

All the while, mainstream economists and politicians—liberal and conservative alike—maintain that higher education is the solution to poverty, inequality, and everything else that ails the nation’s economy.

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The original cartoon, by Adam Bessie and Dan Carino, includes links to further reading embedded within the images.

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Neil Irwin, Claire Cain Miller, and Margot Sanger-Katz have assembled a series of charts documenting America’s enduring—and, in many cases, growing—racial divide. I have reproduced some of them below.

One of the key pieces of information they don’t include has to do with incarceration rates. As you can see from the chart above (from the Pew Research Center [pdf]), African American men were 5 times more likely to be incarcerated in 1960 than white men (relative to the size of each demographic group)—a rate that grew to over 16.5 in 2010.

Here are the other charts:

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After more than thirty years of rising inequality, and in the midst of the Second Great Depression, the financial situation of many U.S. households is dire.

That’s my interpretation of the results of the Federal Reserve’s latest report on the economic well-being of American households.

Here are some of the facts contained in the report:

Overall, only 30 percent of the respondents considered themselves to be better off financially than they were in 2008.

In terms of credit-card debt, only 57 percent of respondents reported that they pay off their balances in full each month. (Among the remaining 43 percent who revolve their credit card balances, 82 percent had been charged interest on their balance at some time in the prior 12 months.)

The median percentage of 2102 income reported saved was only 2 percent (the mean was much higher, 9 percent), while 45 percent of respondents reported that they were not able to save any portion of their income in 2012.

Respondents were asked how they would pay for an emergency expense that came along and cost $400. The majority responded that covering such an expense would be a challenge: 19 percent indicated that they simply could not cover the expense; 9 percent would have to sell something; or would have to rely on one or more means of borrowing to pay for at least part of the expense, including paying with a credit card that they pay off over time (17 percent), borrowing from friends or family (12 percent), or using a payday loan (4 percent).

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24 percent of respondents have education debt for themselves, someone else (spouse, child, or grandchild), or a combination of the two. Among those with each type of education debt, the average amount people reported owing for their own education was $25,750, with a median value of $13,000. Overall, 37 percent of respondents said that the financial costs of education outweighed the benefits. Those who did not complete their program of study were far more likely (56.5 percent) than others (38 percent for those who completed programs, 17 percent for those still enrolled) to say that the financial benefits of their education were much smaller than the cost.

When asked if they could afford to cover the cost of a major out-of-pocket medical expense, 43 percent of all respondents said that it was not likely that they could afford to pay. Only 21 percent of respondents indicated that it was very likely they could afford to pay for a major out-of-pocket medical expense. In fact, almost a quarter of respondents experienced what they described as a major unexpected medical expense that they had to pay out of pocket in the prior 12 months. The result? One quarter of respondents went without dental care in the prior 12 months because they could not afford it, 18 percent went without a doctor visit, 15 percent went without prescription medicine, 11 percent went without a visit to a specialist, and 10 percent went without follow-up care. Overall, 34 percent of respondents reported going without at least one of these types of care because they could not afford it.

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Finally, 23 percent of Americans who are near retirement age (ages 45 to 59) have zero money saved. So, what are they planning to do? Basically, rely on Social Security benefits (58 percent), continue working (25 percent), and/or expect their spouse/partner to keep working (11 percent). Not surprisingly, people’s expectations depend on their level of income:

Responses to the question about the path to retirement also vary consistently by income, indicating that expectations around retirement are closely linked to financial circumstances. While 35 percent of those earning six figures reported that they intend to work full time until a retirement date and then stop working, only 15 percent of those earning less than $25,000 intend to do so. Similarly, 28 percent of those earning less than $25,000 indicated that they expect to “keep working as long as possible,” while only 13 percent of those earning $100,000 or more said the same.

The bottom line: a very large group of Americans are financially on the edge. They’re broke and getting broker.

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Tyler Cowen may just be right about one thing: people’s views of inequality seem to be changing.

“I view opinion as in flux,” Mr. Cowen said. “I find that fewer and fewer people, especially outside of academia, accept the skill-biased technical change story and more and more look to politics, privilege, rent-seeking and the like.”

Even while mainstream economists (like Cowen and Gregory Mankiw) are sticking with their story of just deserts—such that those at the very top continue to benefit from rewards to better skills, technical change, and globalization—and the only feasible solution is more education, lots of others—including heterodox economists and the general public—are looking elsewhere for both explanations of and solutions to the problem of growing inequality in the United States.

And that’s why the Cowens and Mankiws of the world want to change the topic: to worry about the global distribution of income and/or to argue that little can be done about inequality without undermining economic growth.

But they’re wrong. And people seem to be catching on to what’s happening behind the curtain. . .

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Special mention

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