As conversations hang-in the air, rallies continue to form, and policies take shape regarding Financial Literacy for Education, it is important to frame the issue accurately. Financial literacy is commonly understood as an “over-correction”, readjustment in thinking, improved understanding; helping students and families make better financial decisions when considering paying for an undergraduate college degree and beyond. The challenge may not be thinking or solving the problem by retraining the thought-process, but rather more elementary. To this end, Hamilton and Darity (2017) present a powerful argument in the Federal Reserve Bank of St. Louis Review.
Hamilton and Darity stated the “directional emphasis is wrong.” Much of the framing around wealth disparity, including the use of alternative financial service products, focuses on the poor financial choices and decision making on the part of largely Black, Latino, and poor borrowers, which is often tied to a culture of poverty thesis regarding an undervaluing and low acquisition of education. It is more likely that meager economic circumstance—not poor decision making or deficient knowledge—constrains choice itself and leaves borrowers with little to no other option but to use predatory and abusive alternative financial services. Wealth Disparity vs. Financial Literacy .
Still considered the “Land of Opportunity”, the disparity of wealth distribution, coupled with the mortgage crisis of the first decade in the 21st century, has merely widened the gaps. Unfortunately, African Americans and women remain the most vulnerable because of the inequality in employment and wages. Since 2010, the gap between male and female poverty has widened. While female employment has recovered at much the same rate as male employment, men filled nearly 2 out of every 3 jobs added to the U.S. economy in the 4th quarter of 2016. Single women that do find steady employment can expect to earn only 79 cents for every dollar earned by white men. Economic Inequality. The same inequality is glaring among racial divides.
While employment has improved for all races since 2009, the current unemployment rates for African-American men and women are comparable to the unemployment rates white men and women experienced during the worst of the recession. The African-Americans that manage to find employment face a severe and enduring racial gap in wealth production. In 2013, for example, the net worth of white households was still roughly 13 times that of a typical African-American household. Economic Inequality. The more prevalent financial inequality is among gender, and across racial divides; forecasting a reduced debt America, is impossible. Why? Because as the disparity deepens, and the American population ages, gaps in the system reveal the lack of financial resources, financial emergency preparedness, and paying for college education.
It’s all cyclical. The Business Insider offers a snapshot of the student loan debt crisis. Student Loan Debt. The issues appear to systemic. The wealth gap among blacks, Latino, and white families is a strong indicator that minority students are more likely to have to rely on student loans and/or predatory lending to pay for college. And they tend to borrow more. In addition, black graduates may face discrimination in the job market that can make it more difficult to earn enough money to pay back the debt. Policymakers and higher education leaders rarely consider how things like federal policies that lead to students losing government aid, may disproportionately affect black student loan borrowers. Race and Student Debt.
An estimated 86.8% of black students borrow federal student loans to attend a four-year public college, as opposed to 59.9% of white students, according to the National Center for Education Statistics (NCES). Among black students who started school in 2003, 1 in 2 defaulted on student loans within the following 12 years. Black students also saw their starting balance grow by a median 113% in that time frame. The rates of default were lower for Hispanic (36.1%) and white (21.5%) students. Key Findings. Currently, there are about 44 million borrowers in the United States hold about $1.3 trillion in outstanding student loans. Women hold two-thirds of the Student debt, approximately 800 million, while African Americans are hold Simply stated, in the absence of an equitable system, Life’s challenges (student loans/debts, financial emergencies, etc.) will require the entire United States population to bite the symbolic apple of freedom, and swallow the costs. At 12.7 Trillion d responsible for the desperation of some. Debt Crisis.
The topic is presented as an installment of the #All Lives Matter: An Educational Perspective series.