Kentucky’s rural Appalachian households are grappling with financial stress which is disproportionate compared to households in other rural parts of the country.
A report from the Consumer Financial Protection Bureau said medical, credit card, and student loan debt — combined with household incomes significantly lower than the national average — create a perfect storm for hardship.
Shawn Sebastian, senior fellow at the Consumer Financial Protection Bureau, said it creates financial challenges for a large percentage of the population.
“That’s a quarter of people in rural Appalachian Kentucky who are dealing with medical debt collections,” Sebastian pointed out. “And we know that when people have medical debt collections, it has a cascading effect on their household finances in general.”
The report noted people who owe money on past-due medical bills have more than double the rates of delinquency on mortgages, car loans, credit cards and student loans, compared to those without medical debt.
Last year, the nation’s major credit-reporting agencies said they would stop including paid medical debt on consumer credit reports. And beginning next year, most unpaid medical debt will no longer be reported, either.
Sebastian explained residents of Appalachia and elsewhere could even see their credit score get a boost in January.
“The three major credit reporting agencies agreed to remove about 70% of medical debt from people’s credit reports,” Sebastian emphasized. “That’s primarily medical debt that has been paid, or medical debt that is $500 or less.”
And while fewer Appalachians have an open student loan compared to the rest of the nation, Sebastian added student debt is crushing the household finances of many families.
“When you take a ratio of how much student debt is owed, divided by income, nationwide, that percentage is 32%,” Sebastian reported. “In rural Appalachian Kentucky, that percentage is 47%. That’s the student loan burden.”
He added Biden’s $10,000 student loan forgiveness plan, now in limbo, could help relieve Kentuckians’ student debt burden.
The U.S. Supreme Court will hear arguments in lawsuits against the federal student-debt relief plan early next year. Last month, President Joe Biden extended the pause on student loan repayment, interest and collections until June of next year.
