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“Taxing The Most Vulnerable”: Student Loan Debt Is Bad For Women And Congress Is Making It Worse

How bad is the wage gap for women in the workplace?

For college graduates, it’s so bad that it begins even before women begin their careers.

According to a study by AAUW, Graduating to a Pay Gap: The Earnings of Women and Men One Year After College Graduation:

Women and men pay the same amount for their college degrees, but they often do not reap the same rewards. Among 2007-08 college graduates, women and men typically borrowed similar amounts to finance their educations, about $20,000. Because women are paid less than men are paid after college, student loan repayments make up a larger part of women’s earnings. In 2009, among full-time workers repaying their loans one year after college graduation, just over half of women (53 percent) compared with 39 percent of men were paying more than what we estimate a typical woman or man could reasonably afford to pay toward student loan debt. These numbers have risen in recent years.

Outstanding student loans today total more than $1 trillion, surpassing credit card debt. Student loan debt has increased nearly 300 percent over the last eight years, according to a report by the New York Federal Reserve.

Is Congress doing anything about this problem? As a matter of fact they are. They’re making it worse.

This July, unless Congress acts, the interest rate on federally subsidized Stafford loans is set to increase from 3.4 to 6.8 percent. In another example of the Congress’ attitude of “don’t tax the rich, but tax the most vulnerable,” student loans are seen as a nice little moneymaker.

The federal government will make $34 billion this year on student loans. If Congress allows the interest rate on these loans to double, the federal government will bring in even more revenue — money that comes straight from the pockets of students who had to borrow money to go to college.

Of course, not everyone has to pay such a burdensome rate of interest on loans. Big banks can borrow money from the Federal Reserve at a rate of less than 1 percent. There’s something very wrong with this picture.

This week, I attended a breakfast meeting with Senator Elizabeth Warren (D. Mass.) where she spoke about the first piece of standalone legislation she is introducing in the United States Senate.

In a speech on the Senate floor, Sen. Warren said:

The Bank on Students Loan Fairness Act would allow students who are eligible for federally subsidized Stafford loans to borrow at the same rate that big banks get through the Federal Reserve discount window. For one year, the Federal Reserve would make funds available to the Department of Education to make loans to students at the same low rate offered to the big banks. This will give students relief from high interest rates while giving Congress time to find a long-term solution.

At our breakfast, I remembered that it was the mobilization of enormous grassroots support for the Consumer Financial Protection Bureau (then-Professor Warren’s brainchild) that kept pressure on Congress to pass the legislation that established that agency. Her fight to keep student loan interest rates low is her next big campaign, and women should pull out all the stops to support her.

AAUW’s findings tell us that women are disproportionately likely to take out loans; among 2007-2008 graduates, 68 percent of women borrowed money for college compared to 63 percent of men.

According to the AAUW report:

For many young women, the challenge of paying back student loans is their first encounter with the pay gap. “Student loan debt burden” is defined as the percentage of earnings devoted to student loan payments. A high student loan debt burden is an indicator that repayment may create hardship. Individuals with high student loan debt burden are less likely to own a home, have a car loan, or even make rent payments. High student loan debt burden is a challenge for a growing number of college graduates, men and women alike, but is particularly widespread among women, in large part because of the pay gap.

The National Organization for Women (NOW) has a long history of supporting equal pay, comparable worth and other policies that advance women’s economic security. NOW was proud to support Elizabeth Warren in her successful campaign for the U.S. Senate, and we are equally proud to support her urgently needed legislation to reduce the burden of student loan debt.

It’s hard to imagine how anyone could oppose a bill that simply requires the Fed to set interest rates for students at the same low rate the big banks get. But get this: an opponent of Sen. Warren’s bill reportedly suggested — presumably hoping we’ve all forgotten about the taxpayers’ bailout of the too-big-to-fail banks — that unlike students, the big banks deserve to pay a super-low interest rate because they never fail. And they say the 1 Percent has no sense of humor.

Elizabeth Warren has planted the flag for student loan reform by introducing her bill, and now it’s up to us to mobilize support and pressure Congress to pass it. This is grassroots democracy at its best. So, blog about this, write letters to the editor, lobby your senators and your representative.

Help ensure that a college education is a pathway to fulfillment and success for women, and not an opening to crushing debt.

 

By: Terry O’Neill, President, National Organization for Women, The Huffington Post, May 20, 2013

May 22, 2013 Posted by | Education, Women | , , , , , , , | 1 Comment

“Bootstrapping Your Way To The Top”: The Myth Of Rags To Riches

In the latest version of SimCity, a computer game that let’s you pretend to be an urban planner, city residents are born into an economic class and there they remain for life. This may have been done for simplicity’s sake, but the scenario makes the popular computer game disturbingly similar to the situation of most Americans.

The latest report from Pew Charitable Trusts, “Purusing the American Dream,” deals a stunning blow to any romantic notions of bootstrapping your way to the top. It turns out only 4 percent of those raised in the bottom 20 percent ever climb into the top 20 percent. Rather, people raised on one rung of the income ladder are likely to stay pretty close to it as adults. As the report notes, “Forty-three percent of Americans raised in the bottom quintile remain stuck in the bottom as adults and 70 percent remain below the middle class.”

The report, from a non-partisan group that’s far from ideological, shows that while in absolute numbers, the vast majority of Americans are making more than their parents, those increases are rarely enough to help move Americans up the class ladder. In other words, even after adjusting for inflation, most Americans make more than their parents—but few have actually been able to change their socio-economic class. (The report uses the ladder analogy, and the rungs represents 20 percent marks.) That’s because the rich are getting richer faster; income growth has been disproportionately high among those who are already in the top 20 percent. That makes the distribution of classes significantly uneven, finds the report. “The difference between the size of the rungs between the two generations means that while the vast majority of Americans exceeded their parents’ family incomes, the extent of that increase—particularly at the bottom—was not always enough to move them to a different rung of the income ladder.” For 20 percent of Americans, they’re making more money than their parents but are still in a lower class rung.

Among African Americans, the cycle of poverty is even worse. They’re more likely than whites to get stuck in the bottom income quintile—more than half of blacks born in the bottom rung of the income ladder stay there as adults, compared with 33 percent of whites. Even more disturbing: Fifty-six percent of blacks raised in middle class families fall to the bottom two quintiles as adults.

The report confirms what many see in their daily lives: if you’re born rich or born poor, you’ll probably stay that way for the rest of your life. Right now, the American Dream seems to be just that—a myth with little relation to the reality. The implications are impossible to overstate. Our country’s identity is heavily rooted in the idea of economic mobility, and as far back as Alexis de Toqueville, commentators have discussed the importance of that belief. Conservative political rhetoric goes cheerfully on, of course, assuring us that anyone can be successful in this great country if they so choose. Meanwhile our public institutions are increasingly punitive to the poor: Whether it’s the humiliations of getting welfare or the difficulties of escaping student loan debt, we make the poor (and increasingly, the middle class) pay for the sin of not getting born in the right rung of the ladder.

Unlike a computer game, however, a static class system isn’t inevitable and doesn’t have to be permanent.

 

By: Abby Rapoport, The American Prospect, July 11, 2012

July 12, 2012 Posted by | Economic Inequality | , , , , , , , , | Leave a comment

   

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