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 the survey of consumer finance, education, inequality, and Millennials.
2013 Survey of Consumer Finance
The 2013 edition of the triennial Survey of Consumer Finance (SCF), which is compiled by the Board of Governors of the Federal Reserve, was released last week. Economic commentators have begun to analyze the data for what is reveals about things like debt, education, inequality, and overall financial well-being in America. For an overview of the 2013 SCF, Neil Irwin put together “A Guided Tour of Our Financial Well-Being” this week for The New York Times’s The Upshot.
SCF data has specifically been used to measure the extent of the student loan crisis. Beth Akers and Matthew Chingos published a report for Brookings earlier this summer using SCF data to argue that the so-called student debt crisis is really not at “crisis” proportions yet. This finding sparked much discussion, both in support of the findings and calling them into question, about student loans and the extent to which the amount of debt held by college graduates is unsustainable. This week, Akers and Chingos published an update to the original report using the recently released 2013 SCF data, which they interpret as essentially confirming their original findings. Doug Lederman discussed the new Brookings report for Inside Higher Ed.
Even if student loan debt may not be a problem to the extent many commentators think it is, relying on loans as the backbone of the education finance system in the U.S. probably isn’t the best way to help college graduates succeed financially. That’s the argument of a new report from the Assets and Education Initiative at the University of Kansas. William Elliott, one of the report’s authors along with Melinda Lewis, summarized the main points of the report in a blog post for The Ladder: “The report suggests [that we should move] away from student loans as the centerpiece of the U.S. financial aid system, [and instead] pursu[e] the superior outcomes possible with asset-based approaches.” One way to achieve that asset-based approach, he suggests, is “constructing a universal Children’s Savings Account system.”
In an effort to hold higher education accountable for the inequities inherent in the financial outcomes of students from diverse backgrounds, some analysts have begun creating their own system for ranking colleges, one that takes into account affordability, social mobility, and actual career prospects. David Leonhardt described The Upshot’s ranking system, which weights heavily the number of a school’s Pell Grant recipients and makes a judgment about a school’s overall financial accessibility. Washington Monthly, which also publishes its own list of college rankings based on social mobility and affordability, offered a critique of The Upshot’s rankings. Among the concerns raised by Robert Kelchen in a blog post is that “it would be nice [for The New York Times’s The Upshot] to look at a slightly broader swath of colleges that serve more than a handful of lower-income students.”
At the primary- and secondary-school level, Vermont governor Peter Shumlin announced an effort to expand community eligibility for free and reduced-price lunches for schoolchildren in the state. As reported by Laura Krantz for the local news publication VTDigger, “Gov. Peter Shumlin heralded a new program that allows schools in low-income areas to provide free lunch and breakfast to all pupils, not just those who qualify for free or reduced-price meals.” Contrast that experience with this story from NPR, about students in the Houston area being given a cold cheese sandwich when they and their parents were unable to pay for the school’s regular, hot lunches (the schools highlighted in the story have since changed their policies.)
Michael Porter and Jan Rivkin published a report on inequality for the Harvard Business School with an evocative title: “An Economy Doing Half Its Job.” In her coverage of the report for NPR, which involved a survey of HBS alumni, Marilyn Geewax summarized the main finding of the survey: Those surveyed “were far more optimistic about the future for U.S. corporations than for that of workers.” Richard Valdmanis covered the report for Reuters, emphasizing the report’s findings that the wealth gap is “unsustainable.”
As far as solutions to widening inequality, John A. Powell of the Haas Institute for a Fair and Inclusive Society at the University of California Berkely described “six policies for a fair and inclusive society” in a blog post for The Huffington Post.
A new paper published by Jason Houle, a Dartmouth academic, compared “young adult debt across three cohorts.” Josh Mitchell reported on the findings for The Wall Street Journal, emphasizing that “a third of Americans age 24 to 28 … have debts that exceed their assets.” One element that’s not helping this debt-to-assets ratio is Millennials’ habit of “leav[ing] behind an average 24% of retirement account balance after job-hopping.” While the problem of leaving a job before retirement balances vest affects all generations, Millennials were far more likely to forfeit employer contributions to a retirement plan after leaving a job. Melanie Hicken reported on this issue for CNNMoney. The result of these trends was summarized in an article this week by Allison Schrager for Bloomberg: “Only Gen Xers have gotten richer since the recession.” Other age groups, including Millennials aged less than 35, saw their inflation-adjusted incomes decline.
We hosted an event this week, “Investing in the American Dream: Immigrants, Financial Institutions, and Financial Inclusion in America.” To watch a video recording of the event, or to find out more, visit the event page here.
Next week is the Assets Learning Conference, a gathering of the asset building field hosted by CFED. It’s still not too late to register.
Rebecca Vallas and Joe Valenti published a report on asset limits for the Center for American Progress.
Martin Wolf has a new book coming out, about unlearned lessons from the financial crisis. In this interview with Vox he calls for more shared equity housing, less debt, and more savings.