Student Loan Debt Widens Wealth Gap
House Budget Chairman Paul Ryan (R-WI) recently invited controversy in preparation for a number of legislative proposals that would reform America’s poverty programs when he essentially asserted that poverty stems from laziness.
He’s not alone in this thinking, of course. A 2012 report by The Salvation Army showed that nearly a third of Americans believe that people are poor because they are lazy, and not due to economic circumstances beyond their control.
Our Miami foreclosure lawyers know that the perpetuation of these kinds of poverty myths are part of why so many people struggle to emerge from poverty. It’s this same kind of thinking that allowed banks to assert that homeowners were the ones who shouldered the lion’s share of responsibility for the housing crisis.
There is an inherent belief that if people were more responsible, more driven, smarter, more talented – then they wouldn’t be poor, they wouldn’t be losing their homes, they wouldn’t be saddled with debt.
Now, a new report serves to further undercut this notion.
The Associated Press reports that student loan debt is widening the income gap among college graduates. We’re talking people who went to school and became doctors, lawyers and educators. These are smart people. They are driven people. They are responsible.
However, the advantage they did not have was that they were not able to pay for their college up front, as many of their wealthier peers did. As a result, they aren’t able to qualify for a decent mortgage or put money aside for retirement or take other actions that would be deemed smart financial planning.
Graduates who don’t have to worry about student loans are able to start right away building equity in their home or in bonds and stocks. They’ll have more time to watch their investments appreciate. Meanwhile, those burdened with student loan debts and interest spend on average a decade or more paying those down first.
In 2009, the median net worth for a family without any outstanding student loan debt was about $118,000. That was three times as much as the median net worth for those households that did have outstanding student loan debt – nearly $43,000.
Roughly 40 percent of all households in the U.S. led by someone younger than the age of 35 have student loan debt, according tot he Pew Research Center. Some of those interviewed pointed out that they have more degrees and a higher level of education than their parents. And yet, they are worse off financially than the previous generation.
During the Great Recession, student loan debt was the only kind of debt that rose, and totaling $1 trillion nationally, beats out both credit card and auto loan debts, according to the Federal Reserve Bank.
Some 20 million students attend college in the U.S. every year. Of those, 12 million must borrow money. On average, they’re taking out roughly $30,000 in loans. By the time it’s paid, it will amount to more than $100,000 in debt.
And most do pay it off. Of course, they don’t have a choice. It isn’t dischargable in a bankruptcy and there are very few instances in which the government grants loan forgiveness.
Meanwhile, the costs for education is rising while wages have remained stagnant. In the end, we’re going to see that wealth gap only widen – and it’s got nothing to do with laziness.
If you’re battling foreclosure or consumer credit issues in Miami or the surrounding areas contact Jacobs Legal for a confidential appointment to discuss your rights. Call (305) 358-7991. Also, don’t miss Miami Foreclosure Attorney Bruce Jacobs on 880AM/the Biz, every Wednesday from 5 p.m. to 6 p.m. on “Debt Warriors with Bruce Jacobs,” discussing foreclosure topics that matter to YOU.