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Minimum Wage & Student Loan Debt, Getting Smart about the policies and the options that affect you
Today, given the stymying infighting and lack of cooperation, our nation’s capitol appears stuck in paralysis more so than capable of effective policy making. The expectation that the amelioration of pressing political issues affecting millennials (low wages, massive student loan debt, chronically high unemployment), may seem a naïve or false expectation.
The average age of an elected member of the U.S. House of Representatives is 59; however, you can run for the House starting at the ripe age of 25. We drastically need millennials to start filling the halls of elected office if we want to see the issues that affect us the most take center stage.
Whether you are thinking of making a run or tabling politics to pursue other goals, you can get involved and get smart about the policy considerations that directly impact you.
Let’s take a look at a few compelling issues:
Raising the Minimum Wage
While millennial unemployment has been alarmingly high for too long now, many of us, in between careers or trying to launch new businesses have taken minimum wage jobs in the interim. A paycheck is imperative even if it does not derive from employment in your field of choice. However, the reality of minimum wage at $7.25 poses its own sets of financial constraints. In a big way.
A full-time minimum wage worker makes about $15,000 a year, leaving a family of two on the poverty line.
Trying to pay off student loans? Save to buy a car? It’s almost impossible on a minimum wage salary, which adjusted for inflation is $2 less today than it was in the late 1960s.
What about those who wait tables in the interim to cover expenses while in school or while trying to land their dream job?
Brace yourself. The tipped hourly wage has been frozen at a minimum of $2.13 per hour for more than twenty years.
That’s almost three times as old as the iPhone.
While these policies do not seem fair, let alone adequately supportive of workers, the Fair Minimum Wage Act of 2013 could change things. Currently Congress is considering legislation that would increase the minimum wage to $10.10 an hour by 2015 and a tipped hourly wage increase to $7.10 by 2019.
More than 30 million workers would receive a raise, could this be you?
Addressing Massive Student Loan Debt
Within a similar camp, student loan debt has been swelling to dramatic rates, with over $100 billion in increases each year, resulting in a total of $1 trillion in amassed student loan debt last year.
Not surprisingly, analysis by the Federal Reserve reveals that individuals with student loan debt are less likely to borrow money to finance the purchase of a car or a home, affecting the overall growth of the U.S. economy and individual economic mobility, or in short: financial independence.
Seemingly endless with student loan borrowing amounts up almost 44% over an eight year period, according to the Center for American Progress; only 60 percent of borrowers are making scheduled payments with the rest in deferment programs. Simply put, student borrowers cannot keep up.
It’s been projected that millennials will not to be able to retire until the age of 73, if at all, with student loan debt topping as a reason why. While a college education remains a worthy financial and intellectual pursuit, we need to strike reasonable ground regarding repayment options.
Bills such as the Federal Student Loan Refinancing Act would enable those with interest rates on their debt above 4 percent to refinance at a fixed rate of 4 percent, lowering monthly payments. Several U.S Senators at the end of 2013 introduced the Student Borrower Bill of Rights, which guarantees access to information, alternative payment options, and grace periods.
What next?
Policy imperatives affect the lives of U.S residents every day. As informed millennials, we can directly advocate for ourselves and the issues that impact our lives by engaging policy makers, elected officials and remaining informed. It is not just about forthcoming legislation or pressuring those with a vote. Our generation needs to become armed with all the (correct) facts that shape the very outcomes of our lives and ask for adjustments to policies or existing laws as, most importantly, our livelihoods depend.
One Response
In regards to the political debate of minimum wage I believe the best course of action would be to raise the minimum wage to the $10.10 level and then use an annual cost of living adjustment calculator, the same as social security, for future increases. This would ideally take the minimum wage off the table in political debates. It is also necessary to address the variation in cost of living across American cities. The monthly rent of my two bedroom apartment in the DC area for a family of three could purchase a mansion in Louisville, KY or my hometown across the river in New Albany, IN.
Student loan debt is a mess. I was recently unable to qualify for the government service repayment plan because I had been too aggressive with my repayment the first 2 years while still in school and I did not have ENOUGH debt for it to make a difference. That was a bummer. I believe it is a shame that I can buy a home at 4.25 % but my government backed student loan is at 6.8 %. The macro picture you laid out is scary if the repayment levels continue to drop with an increase in the debt total causing serious damage if/when this bubble bursts.