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 savings and taxes, poverty, public benefits, homeownership and housing, and student debt.
Savings and Taxes
Yesterday was an exciting day for the asset building community: U.S. Representative Jose Serrano introduced the Financial Security Credit Act of 2013, which would allow lower-income Americans to save in a variety of ways through the tax filing process. This bill is based off previous work from the Asset Building, and represents an important step forward in making the case that the U.S. tax code should support the savings efforts of average tax payers. (If you haven't yet, be sure to check out the latest paper from the Asset Building Program which lays out the case for utilizing the tax reform process to promote savings.)
In Cleveland, Ohio, a Plain Dealer reader wrote in about his experience with a tax preparation service. Sheryl Harris explains what happened: “The tax preparer, the electronic payment system, the RAC lender, the prepaid card company, the card company’s bank and the courier touched your return as it went from the IRS to you and back -- some taking out fees along the way.”
Poverty
The New York Times examined the relationship between socioeconomic status and experiences with stress. Research shows that "the stress of poverty early in life can have consequences that last into adulthood. Even those who later ascend economically may show persistent effects of early-life hardship. Scientists find them more prone to illness than those who were never poor.”
The Washington Post looked at the economic conditions of white working-class Americans. According to Harvard Professor William Julius Wilson, Americans’ financial situations, not their race, have a growing impact on outcomes. He explains, “It’s time that America comes to understand that many of the nation’s biggest disparities, from education and life expectancy to poverty, are increasingly due to economic class position.”
A new study in Pediatrics Journal identifies a "diaper crisis" among low-income women and caregivers. As Eryn Brown for the LA Times points out, “there are few places to turn when they need help paying for diapers. Keeping a young child dry and clean can cost a pretty penny; the average is $18 a week. A single mother earning $15,080 a year in a minimum-wage job would need to devote more than 6% of her pay to diapers.” ThinkProgress has more and the journal PDF is available here.
Public Benefits
The Center on Budget and Policy Priorities released new analysis of SNAP enrollment showing that participation levels have been highly responsive to economic conditions and as such will come down somewhat as the economy improves. In Ohio, state welfare workers are in disagreement about the impact of welfare reform and new work requirements for TANF participants. One county official puts it this way: “We have met our work requirements by throwing people off . . . . It's scary to think the state agency responsible for meeting families' needs has abandoned it.”
According to USA Today, Patrick O'Carroll, inspector general of the Social Security Administration, testified before a congressional committee that as of June 1, his office had received more than 37,000 reports of "questionable changes to a beneficiary's record," and continues to receive about 50 reports each day of unauthorized changes or attempts, most involving redirecting benefits to prepaid debit cards. The article identifies the use of prepaid cards as a problematic practice contributing to high levels of fraud. Meanwhile, the Consumers Union did an analysis of prepaid cards and found incredible variation in the transparency of fees and other consumer protections.
Homeownership and Housing
David Dayen has an important piece in The New Republic about the double standard present in the Department of Justice's prosecution of mortgage fraud. While individuals who committed fraud have been scrutinized, banks who engaged in similar types of fraud (and had a larger impact on the economy) have not had to answer for their actions.
Bill Lewis, writing for The Tennessean, explores the growing disconnect between homeownership and life events like marriage. He interviewed upwardly mobile 20-somethings in Nashville to learn more about the choice to buy a home independently.
WonkBlog takes a stab at providing "a quick and dirty guide to the housing finance reform battle."
Bloomberg News looks at the declining homeownership rate and concludes: “It’s really important for middle to lower income folks who have a hard time saving and for whom targeting savings programs are not very successful.”
In Prince George's County, MD, ongoing housing strife has prompted officials to look for alternatives to foreclosure.
Student Debt
The New York Times reports on the problem of what happens to people who took out student loans to go to an institution that is now being shuttered for fraud. Herman De Jesus, a senior program associate for the New Economy Project, explains what happened in New York. Three beauty schools closed due to fraud, but students who attended have not been able to get their loans discharged. “Schools are targeting low-income people and people of color for the sole purpose of drawing down large sums of federal aid dollars,” Mr. De Jesus said. The schools “have no intention of providing them with a quality education... unlike mortgages and credit card debt, federal student loans are difficult to relieve, and there is no statute of limitations on their collection.”
Ben Miller with the Education Program points out a facet of the problem that's potentially harder to address: even if the schools had been legitimate, the industry is not a high-paying one.
Demos has new research out on the relationship between student loan debt and long-term asset accumulation. They find “that a dual-headed, college educated household that graduates with an average amount of debt ($53,000) will lose more than $200,000 in retirement savings and home equity from paying off their student loans, compared to a similarly educated household without student debt. Nearly two-thirds of this lost wealth is due to the indebted household’s lower retirement savings while paying off their student loans, while more than a third is from lower home equity.” Reuters reports on the findings.
Quick Hits
ThinkProgress reports on the story of a woman who has been awarded millions of dollars after one of the largest credit reporting agencies failed to correct documented errors in her credit report.
The Cleveland Federal Reserve is hosting an event this fall about Housing, Human Capital, and Inequality.
The Greenlining Institute published an interesting piece about the debt collection industry and it often overreaches its legal authority.
Jessica Silver-Greenberg writes about ChexSystems, an online database that tracks consumers' interactions with checking accounts. More than a million people have been "effectively blacklisted" from mainstream financial services. Mr. Korzeniowski, a 23-year-old who has been unable to open a checking account due to a previous overdrawn account, “acknowledges ‘he made a mistake,’ [but] says the fees he pays for cashing checks, paying bills and wiring money cannibalize the paycheck he gets from part-time construction work. ‘Everything is more expensive,’ he said.”
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