For Immediate Release From The Biden Forum!
Two summers ago, while on a bike ride with some friends, I smacked straight into a large plastic divider that had been placed in the middle of a bike lane. When I hit the divider, I flew face-first off my bike, knocking out my two front teeth and booking a ticket to the emergency room.
Surprisingly, the trauma to my teeth was not all that painful. What really hurt were the medical bills: $6,000 for a pair of root canals, dental caps, and a visit to the oral surgeon. And would you believe it? My health insurance provider was convinced that this was elective dental treatment, which meant I would be paying for what wasn’t covered by the dentist out-of-pocket.
After six months of wrangling — and with the help of a health insurance advocate — I was able to convince my insurance that this incident was indeed not elective, and should be covered as a medical emergency. But the event left me scarred by just how easily my financial situation could unravel.
I was in a relatively privileged position. I had a job, with benefits, and enough in savings to stomach the blow. (Though I did end up maxing out my credit card.) What would have happened if I didn’t have that safety net in place?
With an average debt load of $123,000, it’s no wonder that families struggle to set aside a buffer in case of emergencies.
As it turns out, financial shocks like mine are the norm, not the exception. Fifty-four percent of American families experienced a financial shock in 2015, the most recent year for which data are available. (A financial shock could include unplanned home or car repairs, a pay cut, or uncovered medical expenses.) The typical shock set families back $2,000, though higher-earning households often experienced bigger setbacks.
Despite their prevalence, millions of Americans aren’t prepared for a single financial shock. Every year, 38 million households live “hand to mouth” — meaning they don’t have anything left to put towards savings after their monthly expenses. Most of these hand-to-mouth households aren’t low income — they are often solidly middle-class families who own a home and have a retirement savings account.
At first this might seem surprising, but I get it: Necessities are expensive, especially for budding families. Forty million Americans — and 70 percent of new graduates — are paying off student loans. Forty percent of families have a mortgage, and 34 percent are paying off auto loans. With an average debt load of $123,000, it’s no wonder that families struggle to set aside a buffer in case of emergencies. In fact, half of all Americans report they couldn’t come up with $2,000 within 30 days if they needed to.
Existing workarounds don’t serve people well. Today, the average credit card carries a balance of more than $5,000, and interest rates are high at almost 17 percent. Personal loans are unwieldy; it’s hard to shop around to get the best rate, and existing lenders chase super prime borrowers, leaving everybody else out in the cold. That leaves payday loans, which have astronomically high interest rates: 400 percent in some states.
I figured there must be a better way for families to weather financial shocks, so I started a company called PayShield. The basic idea is that workers, through their employer, can get access to an emergency line of credit at a rock-bottom interest rate. Workers repay their loan over time through modest payroll deductions, and — since PayShield handles the loan repayment schedule — employees never have to share their financial need with their boss. Since workers repay through their future wages, credit scores don’t determine whether they’ll get access to a loan. And unlike payday lenders, the company earns revenue by administering this service — not from charging exorbitant interest rates.
I’d love to go back and relive that summer day. But getting knocked off my bike awakened me to the very real problem of financial stress in this country. I’m hopeful that we have found a way to relieve that stress. When a family faces an emergency — from a broken-down car to a busted water heater to the hospitalization of a child — whether they can pay for it should be the last thing on their mind.
Read the full article HERE!:
https://bidenforum.org/emergency-expenses-...
Posted By: agnes levine
Saturday, July 21st 2018 at 10:09AM
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