Will Student Loans be the Next Mortgage Crisis?
By Bob Hildreth, Guest Contributor on 07/23/2012 @ 01:30 PM
One trillion dollars in student debt is creating a crushing burden on millions of young Americans. But colleges are equally at-risk; deprived of the loans on which they’ve become dependent, they would face a severe financial crisis.
Colleges have dramatically increased their reliance on student loans, with government loans approaching the equivalent of 90 percent of total tuition and fees, according to The National Center for Education Statistics. Private student loans create additional dependency.
College administrators are adamant that student loans are not their problem, that they are merely bystanders to student loan default. After all, they have already received and spent the money; repayment, they say, is the problem of the government and private lenders.
If only a small number of students defaulted, these administrators would be right. But if millions start missing payments — and it’s already close to one million today, according to the NCES — the losses could compromise the government’s ability to lend. Then, colleges would have a serious problem. Already, student defaults have reached close to 9 percent, the same rate at which the recent mortgage meltdown began. If all student “problem” debts, including those forgiven and in forbearance, were considered, the real distressed rate on student loans would be an alarming 20-plus percent.
Contrary to economic theory, student debt grows in good times and bad. Mortgage, credit card, and car loan debt levels all fell during the 2008 financial crisis. Why didn’t student loan debt? Because colleges needed the money. Financial aid officers added more and more borrowing into their student awards to fill the gap between rising college costs and declining family income. The government aided in this process by offering loans, in efforts to increase college attendance.
A student loan reckoning is approaching, just when the financial positions of the government and many colleges are deteriorating. Post-election deficit plans will probably include sharp cuts in student aid, which has grown to almost half of the US Department of Education’s entire budget. Fewer Pell Grants will increase the need for loans, just when many states, most notably California, reduce spending on higher education.
Colleges are also suffering. Moody’s Investors Service has warned that college and university revenue growth will slow significantly in coming years, posting a negative outlook for a majority of these institutions, excepting those with large endowments.
The landscape after millions of students default on loans would be bleak. Public schools would be forced to seek more funding from states, while traditional private schools would fall back on their endowments. The richest colleges would gain market share of the brightest students. And for-profit schools, the most dependent on federal student loans, would suffer most.
California offers a sobering example. State budget cuts have ravished its prestigious higher education system, requiring students to wait years to enroll in foundational classes.. Business and other schools with independently strong endowments are attempting to break away from their harder-hit university systems. The governor is threatening to do away with entire campuses, if Californians fail to raise taxes.
Massachusetts may fare worse than California. Higher education is a mainstay of our economy, accounting for almost half a million jobs; some communities rely on a nearby college as the biggest local employer. What the petroleum price is to Houston, the price of tuition is to our state. If tuition rates suffered a sharp decline, our workforce would, as well.
To avoid a student loan crisis, colleges must find ways to close their financial gaps without relying so heavily on student loans. The government should determine whether colleges are capable of using other resources, such as endowments, to withstand lending cutbacks.
College is a critical investment, but we have made it an extremely risky one. The student loan bubble will burst once it reaches $1 trillion to $2 trillion, bringing down students and colleges with it. Let’s act now to stop another financial disaster.
Bob Hildreth is Founder of Families United in Educational Leadership, a nonprofit that helps low-income families save and plan for their children's educational futures. This op-ed originally appeared in the Boston Globe.
American Dream Photo Challenge Contest Entries
By Veronica Weis on 07/20/2012 @ 03:30 PM
We've really enjoyed all of your savings stories and photos submitted these past two weeks. So, we figured we'd share a few so you could too.
We are Lakota Solar Enterprises, a Tribal Renewable Energy company! Our van’s transmission is in need of repairs. We rely on our van to carry out our projects, bringing solar air heaters to Native American families in need. The functionality of our van is vital to our work. $500 will be a huge help for us to safely transport systems to homes! Our solar heaters provide affordable heat sources to families living at life-or-death poverty rates, and help to reduce the dependency on polluting and destructive sources of energy. Make a difference; choose Lakota Solar Enterprises!
This picture is taken with my best friend/roommate, Heather, at her college graduation. I am saving up for my education because I believe it will be my greatest asset in life. My education will allow me to do everything I want to do and all the things that I thought I could not. Every time I look at the photo, it inspires me to keep on pushing forward and roll with punches even when tough gets tougher. - Shirley Trieu
I’m saving to attend the LBJ School of Public Affairs at the University of Texas at Austin this fall. I plan on specializing in economic development and pursuing a career in public service after graduating. This picture, taken at the LBJ School, hopefully inspires you to think about how you can invest in yourself and your community. - Lance McNeill
Have something big you're saving for? Show off your photography skills by snapping a picture and emailing it to firstname.lastname@example.org with a 100 word description before 5pm on August 1 for your chance to win $500. For more contest info, click here.
Manufactured Housing Meets Music City
By Lauren Williams on 07/19/2012 @ 10:00 AM
The Uniform Manufactured Housing Act Passes with Overwhelming Support
On a steamy Saturday afternoon in July, more than 300 lawyers—including state legislators, practitioners, judges and law professors—descended on Nashville, Tennessee for their Annual Meeting, a week-long exercise in crafting model state laws to improve uniformity and consistency. For two days, these members of the Uniform Law Commission (ULC) debated the intricacies of real property law, the procedural details of converting manufactured home titles from personal to real property, the implications of improving that process for homeowners, state governments and industry, and the painstakingly elaborate stylistic details of legal writing. While the Act was under consideration on the floor, commissioners from every state were able to ask questions, recommend amendments and register their support.
The Act’s Drafting Committee spent several hours after their presentation of the Act carefully considering the input received from the floor and making adjustments where they saw fit. At the final vote of the states on Wednesday, July 18, the Uniform Manufactured Housing Act passed with resounding support from 48 states and opposition from none.
What does it all mean? As Vermont Commissioner and Drafting Committee Chair, Carl Lisman, said in his opening address—there are four main constituencies with a vital stake in this Act: manufacturers, lenders, homeowners and the Uniform Law Commission. This Manufactured Housing Act—a simpler, clearer, more uniform system for converting manufactured homes from personal to real property—serves the best interests of all those stakeholders. A better titling process guarantees homeowners and buyers a better shot at accessing fair, safe and affordable mortgage financing and affords them with a set of consumer protections parallel to those that site-built homeowners receive. Additionally, more consistent titling legislation across different states should make it easier for major national lenders offering manufactured home mortgage financing to operate across state lines. Among other things, the Act offers the following key components:
- Provides an easy method to convert manufactured homes to real property—a new home can be considered real property as soon as the homeowner (1) locates the home on land controlled by the homeowner and connects the home to electricity and (2) files a certificate of location for recording in the land records
- Requires that dealers provide information to purchasers of manufactured homes about their rights to convert the home to real property
- Does not include onerous requirements that manufactured homes be placed on so-called “permanent foundations” or satisfy certain lease terms in land-lease communities in order to become real property
- Prohibits steering by the seller or manufactured home dealer into a certain type of titling
- Addresses the possibility that the home is later moved
The ULC is a 120 year old organization that “provides states with non-partisan, well-conceived and well-drafted legislation that brings clarity and stability to critical areas of state law.” The Act’s passage represents a significant milestone and a serious victory for advocates serving owners of manufactured homes and industry players who recognize the value proposition created when it becomes easier to title manufactured homes as real property. Because of the ULC’s reputation and uniquely open drafting process that draws expertise from commissioners and outside advisors, their approval of the Act lends legitimacy and clout to advocates’ efforts to enact it at the state level.
What’s next? Getting the Uniform Act drafted and passed was a collaborative two-year effort on the part of the Drafting Committee and the many supporters from the field. I’M HOME Network members—including the National Consumer Law Center, Self-Help Credit Union, the Fair Mortgage Collaborative and the Manufactured Home Owners Association of America, along with CFED—played a particularly active role in contributing content expertise and perspective to the drafting process. Others in the I’M HOME Network played a critical role as advisors and supporters—informing both the drafting process and the final vote—by providing insight to I’M HOME staff and contacting their state commissioners to share their personal or organizational experiences.
The passage of the Act is just one step in a much larger (and longer) process to improve, simplify and streamline manufactured home titling statutes across the country. Achieving that goal will require state level advocacy efforts to introduce, support and enact new titling legislation in states where this Act would be an improvement on current statutes. It will also require even greater commitment and resolve from the I’M HOME Network—and hopefully, the broader affordable housing field—of lenders, homeowners, community organizers, advocates and developers. Though it will likely be several years before a real transformation in the market for manufactured home mortgage finance can be realized, the passage of the Uniform Manufactured Housing Act is a major step forward in the right direction.
A Healthier Gambling Alternative to the Lottery and Sweepstakes Games
By Carl Rist on 07/18/2012 @ 10:00 AM
EDITOR'S NOTE: This article originally appeared on the NC Policy Watch website, whose work sounds the progressive voice in North Carolina public policy. To read the original article, click here.
Governor Perdue’s veto of the $20.2 billion state budget proposed by the Republican-led legislature and the subsequent override of the veto represent just the latest skirmish over our state’s uncertain finances. And, with an economy still struggling to rebound and a state revenue-raising structure that’s increasingly not up to the challenges of a 21st century economy, these battles are likely to continue into the foreseeable future.
So, it probably should come as no surprise that, in a desperate effort to fund state government, Governor Perdue made an unorthodox revenue-raising proposal at an impromptu press briefing a couple of weeks ago. Gov. Perdue’s bright idea was to legalize and tax North Carolina’s so-called “sweepstakes parlors” – unregulated gambling operations in which people play computer games in hopes of cashing in on a big win.
The Governor should get credit for this reality check on how many of the state residents are spending their hard-earned paychecks. Indeed, behavioral economists teach us that people love games of chance and that, for most of us, a big potential payout is much more tempting than a sure bet on a more modest return. What’s more, evaluating long-term probabilities of winning and losing are not our strong suit – most of us are much more motivated by short-term gains and losses.
But, shouldn’t public policy in North Carolina seek to encourage healthy financial behaviors, not risky ones? Rather than taking advantage of our irrational tendencies in an effort to solve a budget gap that demands permanent solutions, the Governor should use the psychology of financial decision-making to strengthen household balance sheets in our state.
Here’s one possible avenue for pursuing such an end: Follow the lead of the United Kingdom is establishing something known as “Premium Bonds.” Owners of these unique bonds do not earn interest. Rather, their return is simply the chance to win monthly prizes based on their investment. Each month, bondholders in this “savings with a thrill” scheme are entered into prize draws that are awarded from £50 to £1 million. Over £43 billion (about $65 billion) is currently invested in U.K. Premium Bonds, and 36% of British citizens hold at least one of these bonds. In the best-case scenario, bondholders receive a handsome return; in the worst-case scenario, bondholders have net new savings in their name. Bondholders can get their original investment back at any time.
This idea of “prize-linked savings” may seem novel for North Carolina, but there are already innovative efforts in our state to take advantage of this concept. Just last year, with the encouragement of the North Carolina Credit Union League, the legislature passed the “Save to Win” bill, which exempts certain savings promotion raffles from the two raffle per year limit imposed upon credit unions. Gaining the exemption allows participating credit unions to create Save to Win campaigns with monthly prize drawings that help to encourage credit union members to develop a regular habit of saving.
And this doesn’t have to be limited to credit union members. What if the North Carolina Treasurer’s office created Premium Bond-type savings products that any North Carolina residents could purchase at a bank – or even better – where lottery tickets are sold? The state would reap millions and citizens could pursue their gambling impulses without literally throwing all of the money wagered away as is usually the case in traditional lottery and sweepstakes parlor games.
Let’s use state policy, not to take advantage of our frailties, but rather to incent behaviors that strengthen household finances and encourage investment in our state. A North Carolina Premium Bonds program might just be one way to pull that off.
A&O Network Submits Letter to Congress Opposing Asset Tests in SNAP
By Jennifer Brooks on 07/16/2012 @ 03:30 PM
Last week, the House Agricultural Committee released a farm bill proposal that would cut the Supplemental Nutrition Assistance Program (SNAP, formerly Food Stamps) by more than $16 billion over a decade. Approximately 70% of the savings would come from eliminating Broad Based Categorical Eligibility, which allows states to set their own or waive the assets test. To date, 37 states have eliminated their SNAP asset tests; the proposed farm bill would force all of these states to reinstate the asset tests.
Asset tests are detrimental to long-term financial stability for low-income families. If a family has assets over the state’s limit ($2,000 in most cases), it must “spend down” longer-term savings in order to receive what is often short-term public assistance. Personal savings and assets are precisely the kind of resources that allow families to move off of public benefit programs.
Yesterday, the Assets & Opportunity Network — a national coalition of state and local service providers, advocates, financial institutions, researchers and policymakers working to break the cycle of poverty and create economic opportunity through asset-based strategies — submitted a letter urging the House Agricultural Committee to oppose the proposed Farm Bill. Eighty-one organizations in the A&O Network signed the letter, demonstrating the assets field’s overwhelming opposition to the proposal. Click here to read the letter.
Representative Jim McGovern (D-MA) offered an amendment to maintain Categorical Eligibility and keep SNAP funded at current levels. The Agriculture Committee voted against it with a 15-31 margin. Representative Larry Kissel (D-NC) offered an amendment that would have matched the smaller cuts in the Senate version of the legislation (which maintains Categorical Eligibility), but it was also defeated. After considering more than 90 amendments, the Committee approved the Farm Bill in a 35-11 vote. It will now be considered by the full House of Representatives, likely before Congress adjourns in August.
The following 81 organizations are listed below.
AAA Fair Credit Foundation (UT)
Action for Children North Carolina (NC)
Alabama Asset Building Coalition (AL)
Alachua County Nutrition Alliance (FL)
Alachua County Coalition for the Homeless and Hungry (FL)
Alameda County Community Asset Network (CA)
Arkansas Hunger Relief Alliance (AR)
Atlanta Community Food Bank (GA)
Atlanta Prosperity Campaign (GA)
Baltimore CASH (MD)
California Asset Building Coalition (CA)
Catalyst Miami (FL)
Center for Asset Building Opportunities (CA)
Center for Public Policy Priorities (TX)
Clara White Mission (FL)
Coalition for a Prosperous Mississippi (MS)
Community Action Kentucky (KY)
Community Economic Development Association of Michigan (MI)
Community Empowerment Fund (NC)
Community Financial Resources (CA)
Connecticut Voices for Children (CT)
Corporation for Enterprise Development (DC)
Crittenton Women’s Union (MA)
Delaware Housing Coalition (DE)
East Bay Asian Local Development Corporation (CA)
Florida Prosperity Partnership (FL)
Georgia Food Bank Association (GA)
Guilford County Homeownership Center (NC)
Hawaii Alliance for Community Based Economic Development (HI)
Heartland Alliance for Human Needs & Human Rights (IL)
HOPE Projects Community Action Council (NC)
HOPE Enterprise Corporation (MS)
Illinois Asset Building Group (IL)
Indiana Institute for Working Families (IN)
ISED Ventures (IA)
Just Harvest: A Center for Action Against Hunger (PA)
Kalamazoo County Poverty Reduction Initiative (MI)
Kanawha Institute for Social Research & Action, Inc. (WV)
KC Cash Coalition, Inc. (MO)
Kentucky Equal Justice Center (KY)
Kentucky Youth Advocates (KY)
Legal Services Advocacy Project (MN)
Maryland CASH (MD)
Maryland Cash Match Savings Program (MD)
Metropolitan Housing & CDC, Inc. (NC)
Michigan Primary Care Association (MI)
Midas Collaborative (MA)
Mission Asset Fund (CA)
Montgomery County Community Action Board (MD)
New York State Community Action Association, Inc. (NY)
Neighborhood Partnerships (OR)
Neighborhood Improvement Association, Inc. (GA)
North Carolina Housing Coalition (NC)
North Carolina Assets Alliance (NC) North Dakota Economic Security & Prosperity Alliance (ND)
Oklahoma Policy Institute (OK)
Opportunity Fund (CA)
Policy Matters Ohio (OH)
Partners for Prosperity: New Beginnings for Eastern Idaho (ID)
RAISE Kentucky (KY)
RAISE Texas (TX)
Reinvestment Partners (NC)
Rural Dynamics, Inc. (MT)
Sacramento|Yolo Mutual Housing Association (CA)
Sargent Shriver National Center on Poverty Law (IL)
Savannah Coastal Empire Asset Development Coalition (GA)
Seattle-King County Asset Building Collaborative (WA)
South Carolina Association of Community Action Partnerships (SC)
Southern Bancorp Community Partners (AR)
Step Up Savannah, Inc. (GA)
The Collaborative (NC)
United Way of Coastal Bend (TX)
United Way of Greater Kansas City (MO)
United Way of Marion County (FL)
United Way of North Central Florida (FL)
United Way of Northeast Florida (FL)
United Way Suncoast (FL)
Voices for Children for Nebraska (NE)
Woodstock Institute (IL)
YWCA Delaware (DE)
Only Eight Hours Left to Save $100!
By Sean Luechtefeld on 07/13/2012 @ 04:00 PM
Don't forget that the extended Early Bird Deadline to register for the 2012 Assets Learning Conference is TONIGHT at midnight (EDT)! Be sure to reserve your space by visiting www.assetsconference.org.
This year's Conference offers a series of Institutes, four Plenary Sessions, over 60 Concurrent Sessions and the return of Capitol Hill advocacy visits. Plus, ALC participants get FREE access to the second National Poverty Summit, taking place immediately after the ALC on Friday evening (September 21) and all day Saturday (September 22).
Click here to ensure your $100 discount today!
The Aspiration Gap
By Jennifer Brooks on 07/12/2012 @ 06:00 PM
In a recent New York Times op-ed, David Brooks explores the “Opportunity Gap” and the role it will play in the coming decades as today’s children come of age.
In addition to the “attention gap” and the “enrichment gap” that David Brooks describes, we at CFED also see an “aspiration gap.”
Data from the 2012 Assets & Opportunity Scorecard show that those in the richest income quintile are five times more likely to have college degrees than those in the poorest income quintile.
Why is this so? For starters, aspiring to go to college—and the academic preparation and financial planning that go along with that aspiration—is an integral part of the answer. Brooks writes that poorer kids have become more pessimistic and detached. Given the perception that the cost of college puts higher education out of reach, it’s not surprising that many low-income kids are a little pessimistic about their chances of making it to college.
The good news is that there’s a pretty simple way to change aspirations and college attainment: start saving now. People who have assets – such as a savings account or a home – are more likely to have higher expectations for their futures and the futures of their children.* Data from the Center for Social Development at Washington University in St. Louis show that children with a dedicated college savings account are four times more likely to attend college than those without. Among youth who already plan to go to college, those with a savings account are about seven times more likely to actually attend.**
The only remaining question, then, is how we make saving for college the norm for more low-income families, rather than the exception. The key is financial incentives. Currently, 12 states provide incentives for college saving for at least some of their residents. More states should follow their lead.
In addition, the federal government, which today devotes more than half a trillion dollars annually to encourage the wealthiest to save—and more than half of which accrues to the richest 5% of taxpayers, should provide a $500-savings match to the asset- and aspiration-poor majority.
Thirty years of research has proven that, given a reasonable opportunity, even the lowest-income people will save, go to college, start businesses, buy and keep homes, and create a prosperous future for themselves and their families.
These moveable and manageable policies would go a long way in helping to close the gaps that currently keep too many people from securing their financial futures.
* Min Zhan and Michael Sherraden, “Assets, Expectations and Educational Achievement,” Social Science Review 77 (2003): 191-211.
** William Elliot and Sandra Beverly, The Role of Savings and Wealth in Reducing ‘Wilt’ Between Expectations and College Attendance (St. Louis: Center for Social Development, 2010).
From Rags to Tatters: The State of the American Dream
By Ethan Geiling on 07/10/2012 @ 07:30 PM
The vast majority of Americans make more than their parents, but that doesn’t mean they’re climbing the economic ladder.
New research from the Pew Economic Mobility Project shows that 84% of Americans have higher incomes than their parents did at the same age, adjusting for inflation. Similarly, 50% of Americans have greater wealth than their parents did. This is known as absolute mobility, and by this measure the American Dream appears fully intact. However, even though many Americans are earning more than the previous generation, the extent of this extra income often isn’t enough to move them into a new income bracket.
Relative mobility measures an individual’s rank in the income distribution compared to his or her parents. Forty-three percent of Americans raised in the bottom fifth of the income distribution remain there as adults, and only 4% make it to the top income quintile. The classic “rags to riches” story is more of a Hollywood fairytale than an actual reality.
One of the central tenants of the American Dream is that anyone – regardless of family wealth, economic background, and race – has the same opportunity to build a better life. Pew’s research suggests otherwise; Americans raised at the bottom of the income distribution are likely to remain there as adults. Likewise, individuals born into wealthy households are more likely to remain at the top of the income distribution. This phenomenon is known as “stickiness at the ends.”
For certain groups – like blacks and adults without a college degree – economic mobility is even more elusive.
Among the middle class, only 23% of blacks accumulate more wealth than their parents, compared to 56% of whites. And blacks are more likely to fall out of the middle class than whites. Sixty-eight percent of blacks raised in the middle of the income distribution fall to the bottom as adults, compared to just 30% of whites. Pew’s study does not include Latino families or other households of color because the sample size is too small in the Panel Study of Income Dynamics, Pew's data source for the project.
Receiving a college degree makes a person three times more likely to rise from the bottom of the family income ladder all the way to the top. Almost half of people without a college degree raised in the bottom fifth of the income ladder will remain there as adults. But only 10% of people with a college degree will remain at the bottom of the ladder.
Read the full report: Pursuing the American Dream: Economic Mobility Across Generations
The Assets & Education Initiative
By Jimmy Crowell and Anita Drever on 07/10/2012 @ 01:00 PM
The Assets and Education Initiative (AEDI) at the University of Kansas' School of Social Welfare recently launched a website dedicated to research on assets and education. This exciting new tool will further connect practitioners, policy makers and academics with leading research and data on assets and education.
The easy-to-navigate and well-organized website includes subject bibliographies, working paper series, briefs, reports and news articles related to asset accumulation and education with a focus on low-income and minority groups. The website also contains video recordings of various presentations from the Assets and Education Research Symposium including the keynote speeches delivered by Drs. Michael Sherraden, Mark Rank and Michael Lomax.
In an effort to connect researchers in the field, AEDI also administers a listserv where research endeavors and obstacles can be shared and discussed. AEDI welcomes active involvement from the field to build website content.
CFED is very enthusiastic about the launch of this new and useful research tool. We hope that the release of AEDI’s website will increase awareness of the close relationship between asset accumulation and educational attainment and help to boost interest in the asset-building field.
Take Action! House of Representatives to Vote on SNAP Cuts, Asset Tests
By Katherine Lucas McKay on 07/09/2012 @ 10:15 AM
On July 5, the House Agriculture Committee unveiled its draft Farm Bill legislation with some very bad news for assets advocates: the Supplemental Nutrition Assistance Program (SNAP, formerly food stamps) is targeted for a $16 billion cut. Most of the savings will come from eliminating Broad Based Categorical Eligibility, which allows states to set their own or waive the assets test. Unfortunately, that provision has support not only from Committee Chairman Frank Lucas (R-OK) but also from Ranking Member Collin Peterson (D-MN).
On July 11, the Agriculture Committee will consider amendments to the bill and vote to advance it to the full House of Representatives. Once the bill clears the Committee, its next stop is the House floor.
Advocates should contact their Representatives now to prevent these cuts. More than 40 states use Categorical Eligibility to waive the SNAP asset test for all applicants, allowing millions of low-income families to build the savings they need to successfully lift themselves out of poverty. If the House Agriculture Committee's proposal becomes law:
- Every state that currently uses Categorical Eligibility will have to reinstate its SNAP asset test.
- States will incur a significant administrative burden because they will have to verify the assets of all SNAP applicants.
- Some two million individuals will lose their SNAP benefits entirely.
- The decade of progress that the assets field has made to enable low-income benefits recipients to save will be undone.
Your support can make a difference! You can learn more and send a message to your Representative, through CFED’s Advocacy Center.
Giving Context to Unbanked Data
By Sean Luechtefeld on 07/06/2012 @ 10:30 AM
It’s no surprise that CFED cares about financial access, and our work to promote Bank On is premised on the idea that building assets is infinitely easier with a bank account. The reason why is simple: having free or low-cost access to one’s own money is better than paying to use one’s own money.
Though the concept is simple, it’s sometimes hard to conceptualize just how dramatic the difference between having a bank account and not having a bank account can be. This is why I was so excited to find that my friends at The Sociological Cinema had posted a helpful infographic the other day providing some context about the difficulties of being unbanked. The infographic does an excellent job of visually representing the data, so I’m sharing it with readers here.
I hope you find this infographic helpful. There’s a ton more at The Sociological Cinema, so be sure to follow them on Facebook and check out their photo album on poverty issues.
Treasury Launches MyMoneyAppUp Challenge
By Sean Luechtefeld on 07/05/2012 @ 01:30 PM
EDITOR'S NOTE: Below is the press release sent out by the U.S. Department of the Treasury last week publicizing this exciting collaboration between Treasury and CFED partner organizations CFSI and D2D Fund. We hope you'll consider submitting your ideas to the MyMoneyAppUp Challenge!
The U.S. Department of the Treasury today launched the MyMoneyAppUp Challenge to help Americans gain the tools and information they need to be smarter financial consumers. The Challenge, launched in partnership with the D2D Fund and Center for Financial Services (CFSI), seeks new ideas from the public for mobile applications to empower Americans to shape their financial futures everyday – even while on the move.
The Challenge features two components – an IdeaBank to generate ideas for mobile applications, and an App Design Challenge that solicits more comprehensive mobile application designs for development. The public may begin submitting ideas today for both parts of the Challenge at MyMoneyAppUp.challenge.gov.
“Mobile technology has become an increasingly important part of many Americans’ lives, creating new opportunities to help consumers make smart financial decisions in user-friendly ways,” said Deputy Secretary Neal Wolin. “The MyMoneyAppUp Challenge is designed to tap into the ingenuity and creativity of the American public to generate ideas for mobile applications that can help families be smarter financial consumers.”
The IdeaBank: The IdeaBank is a call for ideas, in 140 characters or less, for app-based solutions from the general public. Ideas may be submitted on the Challenge website where they will searchable to the general public. Visitors to the site will be able to vote on their favorite IdeaBank submissions and a panel of judges will select the final winners from the top 10 that receive the most votes from the public. Winners are eligible to receive cash prizes ranging from $250 to $1,000.
App Design Challenge: The App Design Challenge is a call for comprehensive design proposals for mobile apps from companies, individuals, and teams of individuals. Contestants must complete an online submission form detailing their design and how it will improve financial capability and/or access. Contestants are encouraged, but not required, to use ideas from the IdeaBank as the inspiration for their proposals. A panel of judges will review and score the proposals with the winners being announced at an awards event and eligible for cash prizes ranging from $2,500 to $10,000.
Support for prizes and the administration of the Challenge by D2D and CFSI comes from the Ford Foundation, Omidyar Network, and the Citi Foundation. No government funds were used as part of the MyMoneyAppUp Challenge.
The MyMoneyAppUp Challenge is open to all U.S. citizens and permanent residents who are 18 years or older. For complete details on Challenge eligibility requirements and rules, visit MyMoneyAppUp.challenge.gov.
About the MyMoneyAppUp Challenge
The MyMoneyAppUp Challenge, launched by the U.S. Treasury Department in partnership with the D2D Fund and Center for Financial Services Innovation, is a contest offering cash prizes for the best mobile app ideas and designs to help Americans make smart financial choices, access high quality financial products and services, and control and shape their financial futures.
The Challenge is part of Treasury’s efforts to promote Smart Disclosure, a new initiative by the Obama Administration to expand access to data that can fuel the creation of new products and services to benefit financial consumers. Contestants will be encouraged to create ideas and designs for apps that incorporate data to promote financial capability and access.
To learn more about the Challenge or to submit your idea, visit MyMoneyAppUp.challenge.gov.
AFI Grantee Institute @ ALC 2012
By Jimmy Crowell on 07/03/2012 @ 01:30 PM
For this year’s Assets Learning Conference, CFED is delighted to be partnering with the Assets for Independence (AFI) Program to provide a special Institute just for AFI grantees, as well as conference sessions specially designed for IDA practitioners. Even better, the AFI Program is offering scholarships to AFI grantees who wish to attend – see below for details!
Our goals for the AFI-related conference activities are:
- To offer action-based learning wherever possible. The theme of the Assets Learning Conference is “Ideas Into Action,” and we have taken this theme to heart in designing the AFI-related sessions. Many sessions will include accompanying tools, templates or other resources that reinforce the information provided during the session.
- To deliver relevant, interesting material to grantees with a range of experience levels. We recognize that some attendees will be very new to IDAs and AFI, while others have many years of experience. To ensure that the conference is relevant to all grantees, we have intentionally developed sessions to appeal to grantees at a range of points on the programmatic “lifecycle.”
- To foster interaction and dialogue among AFI grantees, AFI program staff and other conference attendees. One of the most powerful parts of the Assets Learning Conference is the opportunity to learn from and talk with peers in the field – so we have included many opportunities for grantees to interact with one another and with AFI staff.
The AFI Grantee Institute will take place on September 19, with the full conference to follow on September 20-21. Scholarship assistance for AFI grantees is available on a first-come, first-served basis. Click here to register, and for more information, email email@example.com.
CFED Photo Challenge: What Are You Saving For?
By Veronica Weis on 07/02/2012 @ 02:00 PM
This summer, CFED wants to know what Americans are saving for. As part of the 2012 Assets Learning Conference, we’re running a photo challenge aimed at rewarding those with a praiseworthy savings goal. Savers are asked to take a photo of what they're saving for – be it a new car, home, or even a university you’d like to attend – and include a 100 word description of why you’re saving for this item and why you consider it an asset.
From July 1st till August 1st, we’re accepting entries. First place will receive $500 toward their savings goal and the two runners up will receive $100. The winners will be chosen by a panel of judges based on composition, originality and overall appeal and announced at the conference in September. So show off your photography skills and don't forget that creativity is key! The top three photos – along with other entries – will be featured on our website, social media sites and will be on display at the conference photo gallery.
Check out the contest flyer for how to enter:
New Webinar: Credit Building is Asset Building
By Sean Luechtefeld on 06/29/2012 @ 10:30 AM
Wednesday, July 25 2012, 1:00 – 2:00 pm EDT
Co-presented by CFED and NeighborWorks America
Credit is an essential building block for asset building. Without a solid credit score and credit history, individuals cannot qualify for loans to buy a home or a car, start a business or even rent an apartment. Furthermore, the prevalence of predatory and payday lenders creates easy opportunities for Americans to fall into debt and damage their credit, thus hindering their ability to build other assets and financial security. Please join us for a discussion about strategies and financial products that help low-income consumers both access affordable loans and build and repair their credit scores. Presentations will be followed by a Q&A session.
Presenters will include:
- Vikki Frank – Executive Director, Credit Builders Alliance
- Nancy Yuill – Executive Director, Innovative Changes
- Kim Pate (moderator) – Chief External Relations Officer, CFED
Did you know you can listen through your computer? Connect your speakers or a headset to your computer.
For more information, contact Jimmy Crowell.
About NeighborWorks America
NeighborWorks America creates opportunities for people to improve their lives and strengthen their communities by providing access to homeownership and to safe and affordable rental housing. In the last five years, NeighborWorks organizations have generated $20 billion in reinvestment in these communities. NeighborWorks America is the nation’s leading trainer of community development and affordable housing professionals.
CFED Publishes Advocates’ Guide to Self-Employment Assistance Program Expansion
By Katherine Lucas McKay on 06/28/2012 @ 10:15 AM
Last month, the Department of Labor (DOL) sent a Guidance Letter to each state’s economic development and workforce agencies about $35 million in grant funding available for states to establish or expand Self-Employment Assistance (SEA) Programs. Today, CFED has published an advocacy guide to help microenterprise and asset-building advocates take advantage of these new resources (link).
SEA is a federal program that allows states to offer entrepreneurship training to unemployed workers who are interested in starting their own businesses. This proven program has had only been adopted by a few states because the process to opt in can be very difficult, requiring an act of the state legislature. Over the past few years, CFED worked with Senator Ron Wyden (D-OR) to develop a proposal to expand SEA and make it easier for states to participate. Many elements of our proposal became law in February when Sen. Wyden included it in Unemployment Insurance legislation that Congress passed in February.
This policy has the potential to help thousands of unemployed workers launch businesses while receiving unemployment benefits and training to help their businesses succeed. It can also help microenterprise development organizations across the nation expand their services through partnerships with state workforce agencies.
States can apply for the grant funds any time between now and June 30, 2013. In order to receive an award, however, a state must have an SEA program. Our advocacy guide includes a step-by-step breakdown of what advocates need to know. The guide details:
- How to persuade state agencies to opt in to SEA and apply for funding
- Recommendations for effective partnerships with the workforce development field
- Where to start, based on your state’s current SEA status
- Links to a variety of additional resources from DOL and some of our partners. The nation has been struggling with an unemployment rate higher than eight percent for more than three years and nearly half of all unemployed workers have been out of work for more than six months. For some job seekers, starting a business provides a way to create their own jobs.
We encourage you to read the guide and get in touch with us if you put it into action! If you have any questions about the guide, SEA or other microenterprise and self-employment resources, please contact Federal Policy Analyst Katherine Lucas-Smith.
Achieving Excellence in Affordable Housing
By Sean Luechtefeld on 06/27/2012 @ 05:00 PM
EDITOR'S NOTE: This post originally appeared this morning on NeighborWorks America's blog and features Stacey Epperson, President & CEO of partner organization NextStep.
Some of you may have read my recent interview in Forbes, and I’d like to give a little background on the transformation I talk about there. Less than five years ago, I was the executive director of Frontier Housing in northeastern Kentucky, and one of manufactured housing’s worst critics. I adamantly disliked the industry, from its perceived shady dealers to its poor quality materials, and actively steered residents away from purchasing its homes. So when counselors began to tell me that those in need of affordable housing often opted for manufactured units, I refused to listen. When colleagues told me that they struggled to build more homes than the number manufactured housing dealers shipped into the county, I refused to listen. When my own staff admitted to living in manufactured homes or using them for temporary housing, I still refused to listen. It was not until Frontier’s housing production began to slip that I finally confronted the situation: the manufactured housing industry represented a worthy opponent, and Frontier would need to rethink its tactics in order to compete.
My transformation was guided by NeighborWorks America’s executive leadership program, Achieving Excellence in Community Development (AE). During the first week, the class examined the case of a nonprofit that could not compete with local loan sharks that offered quality choices along with less complicated rules and quicker results. I came to a staggering realization: the manufactured dealers were the loan sharks in the story. Frontier was treating clients as a unified group, not as customers with individual preferences. An exciting question soon emerged from the subsequent discussion: what if manufactured housing was the solution, not the problem?
Returning to Frontier with the AE focus on honesty and performance-driven change, I began to move away from old ways of thinking and critically assess the situation. I set an AE performance challenge for Frontier to triple the number of customers served while cutting production time in half and maintaining a loan delinquency rate below 5%. To meet this challenge, I restructured Frontier to run more efficiently and effectively, assigning staff to cross-department teams that made the best use of their strengths and encouraging them to adopt a unified commitment to measurable results.
When I went public with the performance challenge, I did not receive an encouraging response; in fact, many individuals cautioned me to “not go there” and that while “modular housing was ok, I should stay out of the manufactured field.” Although I remained confident that I was on the right path, I had also learned from the AE program to pay attention to the criticism and to constantly seek out new opportunities for growth. So, we made changes and then we changed again. By listening to the voices of dissent and continuing conversations with those in the field, I learned of Warren Buffet’s purchase of Clayton Homes and realized that, in lieu of competing with the manufactured housing industry, Frontier could align with it. We eventually teamed up with Clayton Homes to become Kentucky’s first nonprofit dealer of manufactured housing.
In the end we met our goals, and even exceeded them. We tripled total housing production and our loan fund while cutting in half the time needed to get clients into a new home. Further, we have worked to improve the image of the manufactured housing industry, and encouraged other nonprofits to form similar partnerships. We've also established the Next Step® Network in 2010, a social venture that mobilizes a national network of nonprofits to provide affordable housing solutions tailored to the needs of their communities.
I credit Achieving Excellence for helping me challenge my own ideas about the manufactured housing industry and prompting me to restructure my organization. The program also opened my mind to the partnerships that have propelled Frontier and the Next Step Network to a new level of service. With the support of groups like CFED, I’ve been able to expand our efforts even further. Our program has not only been a success for us as an organization, but for families who’ve benefitted from having exceptionally good, viable, green housing at prices that would otherwise have been unaffordable.
Declining Household Wealth and What We Can Do About It
By Ethan Geiling on 06/26/2012 @ 05:00 PM
New data from the Federal Reserve’s triennial Survey of Consumer Finances (SCF) show that household income and wealth significantly dropped from 2007 to 2010. The Survey of Consumer Finances is one of the most robust national data sets on the household balance sheet.
Median household income (adjusted for inflation) fell 7.7% between 2007 and 2010. We at CFED believe that financial security is not just about what you earn – it’s also about what you own. Household net worth – which includes assets such as a home, business, car, and money in a bank account – decreased even more drastically than income.
Median household net worth fell 38.8%, from $126,400 to $77,300 over just three years. Not surprisingly, most of this decline was driven by the collapse in housing prices. The decline was especially pronounced in populations where a home was their main asset, like families headed by someone 35 to 44 years old. For this group, net worth fell 54.4%, from $92,400 to $42,100.
These data confirm much of what we found in the 2012 Assets & Opportunity Scorecard. And in particular, low-income households and households of color have been disproportionately impacted over the past few years. It’s clear that the recession and its aftermath have left unprecedented numbers of families barely able to make ends meet.
The Federal Reserve also found that the proportion of families that saved any money dropped from 56.4% in 2007 to 52.0% in 2010.
In addition to gathering information on if a family saves, the Federal Reserve asks families why they save. From 2001 to 2007, the top reason for saving money was retirement. However, in 2010, for the first time, families identified liquidity or “saving for a rainy day or emergency” as the top motivation for saving. This makes sense given the economic context. In a weak economy with high unemployment and shrinking services, vulnerable families are prioritizing short-term precautionary savings over longer-term savings goals like homeownership or retirement.
How Policy Supports Wealth Building
The federal government helps many families build wealth and save for long-term goals like homeownership and retirement. For example, consider historical policies such as the Homestead Act, GI Bills and creation of the 30-year mortgage, as well as current policies such as home mortgage interest deductions and tax-preferred retirement savings. All of these policies are examples of government-supported wealth building.
Unfortunately, such policies have been uneven and inconsistent. And in many cases, even as government subsidizes asset building for middle- and upper-income households, it restricts such opportunities for low-income households. The reason for this disparity is simple: The primary way government supports wealth-building is through special deductions and deferrals in the tax code. So, if you don’t earn enough to have a tax liability, you can’t benefit from these subsidies. CFED’s report - Upside Down: America’s $400 Billion Federal Asset-Building Budget – investigates exactly how much the federal government spends on wealth building and who benefits from these incentives (hint: it’s not the families that need the help).
The Survey of Consumer Finances data show that families continue to struggle. It also underscores the need for us to reform the “upside down” system of wealth building incentives in this country.
CFED Announces the Saver to Homeowner Story Fund
By Stephanie Halligan on 06/25/2012 @ 03:30 PM
Submit a success story from your IDA program and earn $3,000 per saver!
Do you have an IDA saver who has recently purchased a home, and who has a compelling story to share? CFED, with support from Bank of the West, is looking for stories and photos of recent homebuyers to share with the field. In exchange, CFED and Bank of the West will provide your program with $2,000 in matching funds and $1,000 in administrative support for financial education (for a total of $3,000) for each story that is accepted.
IDA programs interested in applying must submit a homeowner’s story, photo and signed waiver for each eligible saver, and must comply with the terms on the Saver to Homeowner Story Fund website.
How to Submit Your Success Stories
To submit an entry, please visit the Saver to Homeowner Story Fund website for the terms of the program and required documentation. IDA practitioners may submit multiple entries, though we cannot guarantee that all entries will be accepted.
DEADLINE: AUGUST 15, 1012
Funds are available on a first come, first served basis, so submit your entry as soon as possible! If you have any questions, please visit the Saver to Homeowner Story Fund website.
CFED would like to thank Bank of the West for sponsoring the Saver to Homeowner Story Fund and for their continued support of IDA programs across the country.
Can mobile technology inspire a new habit of saving for the future?
By Vince Lampone on 06/22/2012 @ 02:00 PM
As any smartphone owner can attest, mobile technology continues to transform us at breakneck speed. In particular, the glut of mobile apps – nearly half a million for the iPhone alone! – allows us to waste time, and spend impulsively, in ever more creative ways.
Yet while instant gratification may be flourishing, it’s also true that mobile apps have the potential to kick-start a positive “high-tech behavioral revolution”, empowering us with highly personalized tools to manage our physical and financial health – ones which previously had been the province of the well-heeled alone.
In our field, popular apps like Mint.com continue to offer wonderful tools for savvy Americans to manage their personal finances. However, most share Achilles heels – they rely on Internet access, as well as records from official bank and credit card transactions. Great news for those of us tapped into mainstream financial institutions… but not so much for people without credit cards or smartphones.
Thankfully, a new player is stepping in to help fill this gap. Juntos Finanzas, a Stanford-bred startup, is harnessing the power of humble text messages to help cash-based families track their finances. These users can text the amount and type of their expenses to a dedicated phone number, and get a handsome mailing each month that tells them exactly where their money went. (They also receive simple budget updates by text, at any time they want.)
Since credit cards often encourage impulse buying, an electronic budgeting system that looks favorably upon cash usage is a definite plus. Also, I can’t help but suspect that the act of manually texting the dollar amount of every transaction is another helpful check against rash purchasing for many users.
As their name suggests, Juntos Finanzas is especially geared towards the Latino community. But their simple, text-based product concept could have potential appeal to a much wider swath of Americans – including anyone who can’t be bothered with paper, or those who think of financial websites like Brussels sprouts – “good for you”, perhaps, but hopelessly boring and best avoided.
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