May 17, 2010
LEXINGTON - A new report by two students in Washington and Lee University's Shepherd Program on Poverty and Human Capability highlights the need for more structure to support personal financial needs in the Rockbridge County area.
Local banks and community agencies cited in the report noted that the past year and a half has been especially difficult in terms of lending. In the current economic climate, people with a strong credit history can no longer gain approval for loans because credit has "dried up." Also, while a low credit rating would previously have fallen in the 620 range, banks now require a minimum score closer to 680 or 700.
The report also cited the unstable employment and a lack of job opportunity in Rockbridge County as contributing to increased personal finance problems for area residents.
According to the Virginia Economic Development Partnership, the unemployment rate in Rockbridge County in December 2009 was as high as 7.7 percent, compared to a statewide rate of 6.7 percent. Of those unemployed, 41.1 percent fall below the poverty line.
In their study, the students identified lack of affordable child care as a frequent issue for women, who comprise a large portion of the unemployed. The report demonstrated that a family with a median income of $58,529 would have to spend 35 percent of that income to place two children in licensed child care. The number falls to 25 percent in the city of Lexington but still represents an extremely significant portion of annual income.
Many area occupations do not pay more than $15 per hour and 25.1 percent of Rockbridge County's population has a household income of less than $24,999 per year. Rockbridge County also has a lack of low-skilled work available, and those fortunate enough to have a job are often not stably employed since many area jobs are seasonal.
Perhaps one of the report's most difficult recommendations to implement, but potentially the most effective, would be the creation of an independent savings matching program for the Rockbridge area similar to the 2:1 accounts offered by the Virginia Individual Development Accounts program. The report also recommended increased use of local credit unions to provide an alternative to payday lending when someone is denied a bank loan.
Other recommendations included increased counseling by banks at the point of each transaction such as opening a bank account or receiving a credit card for the first time. Setting a weekly time slot in which individuals can come in for quick question and answer sessions would have the added benefit of promoting closer relationships between the banks and their clients.
Increased financial education in schools and for adults are also recommended. "We're especially excited about the possibility of creating a student financial services group that can help provide credit counseling and seminars in schools and low-income housing units," said Harris.
The new report expands on the 2009 Rockbridge Poverty Assessment from W&L which gave a broad overview of poverty issues in the Rockbridge area, including Lexington, Buena Vista and Rockbridge County. However, the initial report did not cover the personal finance issues that low-income residents faced.
In compiling their report, Harris and Donnelly spoke directly with community leaders, agency and organization leaders, individuals in the banking sector, as well as to low-income residents of Rockbridge County. They also created and distributed surveys to various groups.
"This was definitely one of the most rewarding experiences I've had at W&L," said Harris. "It emphasized that you learn by doing and by applying your work outside of a lecture or classroom. We were also getting involved in the community and talking to people who deal first hand with these issues."
"I think we really learned a lot about communicating with people, how to structure things, and it's been really interesting," added Donnelly.