CNN Money has an article on young people and credit cards, which shows a decrease in credit card debt and a related increase in credit scores for people aged 18 to 29. Apparently, there are multiple causes, including an aversion to credit card debt among young people AND an aversion to young people among credit card issuers.
Oh, and then there is the aggressive campaign to get people to start using prepaid cards, where the fees are all up-front and the risk is all on the side of the consumer.
I’m sitting next to a marketing lead for a student loan program with a major bank. She explained how there is a lot of education about what student loans entail before you get into one. “It’s their responsibility,” she points out. “They sign for it.”
That’s how the societal problems of income and educational inequality and of unregulated educational institutions get translated into individual responsibility–by a very nice lady, who just happens to make a living from selling indenture as effectively as possible.
Bill Moyers talked to economist Richard Wolff yesterday about the astonishing rise of inequality in the last 30 years. One telling fact is that peak purchasing power of the minimum wage was in 1968. Advancing inequality is astonishing not because it’s unprecedented, but because it’s happening in a so-called democracy, with the apparent consent of the governed.
Sadly, this aligns with a striking non-finding from the FAIR Money research: nobody talked of social injustice in connection with their personal finances, even though all but one or two had drawn an extremely short stick in the lottery of American life. All our participants internalized their difficulties as personal challenges, which may tip over the edge into personal failure anytime. This is why FAIR Money means to develop tools that give people more power in their own financial lives and, perhaps, a footing to participate differently in the political decision-making that affects them every day in every way.
Jeffrey Williams, a professor of English and literary and cultural studies at Carnegie Mellon, compares student loan debt to indentured servitude. Here’s the pith of his argument:
“the growth in debt has ushered in a system of bondage similar in practical terms, as well as in principle, to indentured servitude. The analogy to indenture might seem exaggerated but actually has a great deal of resonance. Student debt binds individuals for a significant part of their future work lives. It encumbers job and life choices, and it permeates everyday experience with concern over the monthly chit. It also takes a page from indenture in the extensive brokerage system it has bred, from which more than four thousand banks take profit (even when the loans originate with the federal government, they are still serviced by banks, and banks service an escalating number of private loans).”
It struck me how we would be reflexively outraged by 17th-century forms of indentured servitude, but we are pretty accustomed to modern versions of it, to the point of having to work at seeing it clearly.
A summary of Williams’ argument is available for free, while the full article is harder to lay hands on.
The Huffington Post reports some jaw-dropping numbers for projected profits from student loans in May 14 article entitled Obama Student Loan Policy Reaping $51 Billion Profit: “The Obama administration is forecast to turn a record $51 billion profit this year from student loan borrowers, a sum greater than the earnings of the nation’s most profitable companies and roughly equal to the combined net income of the four largest U.S. banks by assets.” The whole article is a must-read
Chase has launched the Resource Center for Mindful Spending in connection with their new “Blueprint” tool, which encourages you to pay more than the monthly minimum on your credit card bill. Kai Rysdal of the radio program Marketplace asked if we could take such a thing seriously. Good question.
But the resource center does have an interesting paper called “Born to Spend: How Nature and Nurture Impact Spending and Borrowing Habits,” which looks at contributing factors to “poor” financial habits. It’s an interesting read and makes some high-level recommendations that resonate with FAIR Money’s general outlook, including “smart nurturing,” technology solutions, and turning finances into fun. But behind all that good sense lurks another question–if so many people are so bad at managing money, does that mean that people are inadequate or that money (under current conditions) is just too hard to manage?
FAIR MONEY