391% - The average APR for a payday loan in Louisiana. (Source: Center for Responsible Lending)
Louisiana parents struggle with student fees
A public school education is supposed to be free. But as education investments have lagged in recent years, some districts have compensated for revenue losses with student fees. Now a state task force is assessing those fees, and whether they have become an undue burden on low-income parents. The fees include everything from homeroom fees, to locker fees, to fees for dual enrollment courses that provide college credit. Will Sentell of The Advocate has more:
“Children’s access to educational opportunity should never be limited by their family income, particularly in public and publicly-funded schools,” Erin Bendily, assistant state superintendent of education said in an email. “With over two-thirds of Louisiana’s students coming from economically disadvantaged households, it is important that schools examine fees and communicate clear processes for addressing any financial hardships,” Bendily said. The fees have an impact on who takes the classes. While black students make up 44 percent of the high school population, they only account for 22 percent of dual enrollments, according to state figures. Students from low-income families make up two-thirds of high schools but only 37 percent of dual enrollment classes.
The task force hopes to make recommendations on how to be transparent with student fees, how to provide options for parents who may have trouble paying, and ensure that fees are not inhibiting opportunities to certain students.
The group also said disputes over fees should not affect student grade progression, access to report cards or graduation. Officials in five school districts told the state they had withheld educational records because of the failure of students to pay fees and debts. Neva Butkus, education policy analyst for the Louisiana Budget Project, said Louisiana has the highest rate of child poverty in the U.S. A $50 fee might not sound like much, Butkus said, but it represents a day’s wages for a parent holding a minimum wage job. She said the last thing public schools should be doing is erecting financial barriers for students. “Public education is there to level the playing field,” Butkus said.
Payday lending reforms in jeopardy
A long-awaited rule by the federal Consumer Financial Protection Bureau (CFPB), set to take effect in August, will require predatory payday lenders to assess their customers’ ability to repay a loan before they are issued. This reform is crucial because payday lending customers often renew their loans when they cannot afford to pay them back, chaining them to their lender in long-term cycles of debt. But President Donald Trump’s administration announced last week that it is moving to undo the rule, passed in the waning months of the Obama administration. The AP’s Ken Sweet has more:
The cornerstone of the rules enacted last year would have required that lenders determine, before approving a loan, whether a borrower can afford to repay it in full with interest within 30 days. The rules would have also capped the number of loans a person could take out in a certain period of time. But since President Trump appointed Acting Director Mick Mulvaney, the bureau has taken a decidedly more pro-industry direction than under his predecessor. Mulvaney has proposed reviewing or revisiting substantially all of the regulations put into place during Cordray’s tenure.
Predatory lenders complain that the regulations are too strict, and could force them to close down by disrupting a business model that relies on a steady stream of desperate repeat customers. The CFPB agrees.
It’s an argument the CFPB actually agreed with since the industry derives most of its profits from repeat borrowers: those who take out a loan but struggle to repay it back in full and repeatedly renew the loan. When the rules were finalized last year, the bureau estimated that loan volume in the payday lending industry could fall by roughly two-thirds, with most of the decline coming from repeat loans no longer being renewed. The industry, which operates more than 16,000 stores in 35 states, would likely see thousands of payday lending store closures nationwide. “Payday lenders don’t want to take a borrower’s ability to repay a loan into consideration because they make billions of dollars each year trapping these consumers in a nearly impossible to escape debt cycle where the only way borrowers can pay back their loan is by taking out a new loan, over and over again,” said Karl Frisch, director of consumer group Allied Progress, who has been a vocal critic of Mulvaney and his tenure at the CFPB.
Slow wage growth, despite strong economy
Unemployment may be at record lows, but wage growth has not kept pace with the booming economy. Ryan Nunn and Jay Shambaugh of the Brookings Institution’s Hamilton Project elaborate:
Although the annual rate of real wage growth was 1.4 percent in 2015-16, it has been just 0.4 percent in 2017-18. This weak wage growth has occurred while labor markets strengthened in a variety of other ways. Nine years ago, the United States exited its last recession — the most severe in post-war history — as GDP resumed growth. Then, in April 2010, the U.S. began an unprecedented run of job creation that continues through the present day. The unemployment rate has since fallen to 3.7 percent in September 2018 from a peak of 10.0 percent.
There are a few plausible explanations as to why wage growth has been almost non-existent:
Labor markets may be weaker than they appear. The prime-age (25-54) labor force participation rate is still more than 2 percentage points below its 1999 peak. Some of those out of the labor force may be available for employment, thereby helping hold down wage growth. … The growth in productivity for workers and businesses has been low on average since the start of the recession. Lower productivity growth tends to hold back wage growth. Business and labor market dynamism have weakened, leading to an economy with mutually reinforcing low productivity growth and low wage growth. Without fast-growing business startups and an abundance of upwardly mobile job-switchers, technological progress diffuses across the economy at a slower rate. This also means that fewer new firms are paying high wages to hire away workers from their current positions.
Parental wealth impacts millennial homeownership
A new study on intergenerational homeownership has concluded that millennials whose parents were homeowners are 7 to 8 percentage points more likely to own a home themselves. Also, the wealth of a millennial’s parents directly impacted their likelihood of purchasing a home. Considering white parents are significantly more likely to be homeowners than black parents, millennial homeownership is also a race equity issue. A new report from the Urban Institute’s Jung Hyun Choi, Jun Zhu, and Laurie Goodman provides context and recommendations on how to better assist millennials who are poorly positioned to become homeowners:
In recent years, house prices have increased (especially at the lower end of the market and in areas where supply is limited) while credit continues to be tight. Our research suggests that young adults who can receive sufficient help from their parents are more likely to access homeownership than in the past. We also make several policy recommendations to support first-time home buyers who do not have parental assistance: (1) improve financial education on homeownership, (2) introduce tax-free accounts to save for a down payment, and (3) expand the credit box to include more creditworthy borrowers. These policies could help bridge the racial and ethnic gaps in homeownership and expand the wealth-building opportunity for future generations.
Number of the day
391% – The average APR for a payday loan in Louisiana. (Source: Center for Responsible Lending)