II 112th CONGRESS 1st Session S. 1260 IN THE SENATE OF THE UNITED STATES June 22, 2011 Mr. Akaka introduced the following bill; which was read twice and referred to the Committee on Health, Education, Labor, and Pensions A BILL To require financial literacy and economic education counseling for student borrowers, and for other purposes.

1.

Short Title

This Act may be cited as the College Literacy in Finance and Economics Act of 2011 or the College LIFE Act.

2.

Findings

Congress finds the following: (1)Student borrowing is widespread in higher education, and more than $100,000,000,000 in Federal education loans are originated each year. In 2008, 62 percent of recipients of a baccalaureate degree graduated with student debt. (2)Forty-eight percent of students at 4-year public institutions of higher education borrow money to pay for college, as do 57 percent of students at 4-year private institutions of higher education, and 96 percent of students at for-profit institutions of higher education. (3)In 2008, 92 percent of Black students, 85 percent of Hispanic students, 85 percent of American Indian/Alaska Native students, 82 percent of multi-racial students, 80 percent of Native Hawaiian/Pacific Islander students, 77 percent of White students, and 68 percent of Asian students received financial aid. (4)Students depart from institutions of higher education with significant debt. In 2008, the average student loan debt among graduates of institutions of higher education was $23,186, and 1 in 10 recipients of a baccalaureate degree graduated at least $40,000 in debt. In 2008, 57 percent of recipients of a baccalaureate degree from a for-profit institution of higher education owed more than $30,000, and the median amount of debt was $32,700. Since 2003, the average cumulative debt among students at institutions of higher education has increased by 5.6 percent each year. (5)Students enrolled in for-profit institutions of higher education account for 47 percent of all student loan defaults, despite representing approximately 10 percent of all students enrolled in institutions of higher education. Since 2003, the national cohort default rate has increased from 4.5 percent to 7 percent. (6)Students rely on access to credit. Fifty-six percent of dependent students at institutions of higher education had a credit card in their own name in 2004. The average credit card balance among such students who were carrying a balance on their cards was $2,000. (7)According to the National Foundation for Credit Counseling, the majority of adults (56 percent of adults in the United States, or 127,000,000 people) do not have a budget or keep close track of expenses or spending. (8)According to a 2009 National Bankruptcy Research Center study, consumers who received financial education through pre-bankruptcy counseling had 27.5 percent fewer delinquent accounts and remained current on their accounts for 29 percent longer. (9)According to the Financial Industry Regulatory Authority Investor Education Foundation, less than one-third of young adults (ages 18 to 29) set aside emergency savings to weather unexpected financial challenges. (10)According to a Jump$tart Coalition for Personal Financial Literacy survey, 62 percent of high school students cannot pass a basic personal finance exam, and financial literacy scores among future higher education students are low. (11)According to research by the National Endowment for Financial Education and the University of Arizona, schools are the institutions that students trust most to help increase their knowledge of personal finance.

3.

Financial literacy counseling

Section 485 of the Higher Education Act of 1965 (20 U.S.C. 1092) is amended by adding at the end the following: (n)

Financial literacy counseling

(1)

In general

Each eligible institution shall provide financial literacy counseling to student borrowers in accordance with the requirements of this subsection, through— (A)financial aid offices; (B)an employee or group of employees designated under subsection (c); or (C)a partnership with a nonprofit organization that has substantial experience developing or administering financial literacy and economic education curricula, which may include an organization that has received grant funding under the Excellence in Economic Education Act of 2001 (20 U.S.C. 7267 et seq.). (2)

Entrance and exit counseling required

(A)

In general

Financial literacy counseling, as required under this subsection, shall be provided to student borrowers on the following 2 occasions: (i)

Entrance Counseling

Such counseling shall be provided not later than 45 days after the first disbursement of a borrower's first loan that is made, insured, or guaranteed under part B, made under part D, or made under part E. Financial literacy counseling on this occasion may be provided in conjunction with the entrance counseling described in subsection (l), if the financial literacy counseling component is provided in accordance with the requirements of subparagraph (C). (ii)

Exit Counseling

Such financial literacy counseling shall be provided, in addition to the financial literacy counseling provided under clause (i), prior to the completion of the course of study for which the borrower enrolled at the institution or at the time of departure from such institution, to each borrower of a loan that is made, insured, or guaranteed under part B, made under part D, or made under part E. Financial literacy counseling on this occasion may be provided in conjunction with the exit counseling described in subsection (b), if the financial literacy counseling component is provided in accordance with the requirements of subparagraph (C). (B)

Exceptions

The requirements of subparagraph (A) shall not apply to borrowers of— (i)a loan made, insured, or guaranteed pursuant to section 428C; (ii)a loan made, insured, or guaranteed on behalf of a student pursuant to section 428B; or (iii)a loan made under part D that is a Federal Direct Consolidation Loan or a Federal Direct PLUS loan made on behalf of a student. (C)

Minimum Counseling Requirements

Such financial literacy counseling shall include a total of not less than 4 hours of counseling on the occasion described in subparagraph (A)(i), and an additional period of not less than 4 hours of counseling on the occasion described in subparagraph (A)(ii). A total of not more than 2 hours of counseling for each of the occasions described in subparagraph (A) shall be provided electronically. (D)

Early departure

Notwithstanding subparagraph (C), if a borrower leaves an eligible institution without the prior knowledge of such institution, the institution shall attempt to provide the information required under this subsection to the student in writing. (3)

Information to be provided

Financial literacy counseling, as required under this subsection, shall include information on the Financial Education Core Competencies as determined by the Financial Literacy and Education Commission established under title V of the Fair and Accurate Credit Transactions Act of 2003 (20 U.S.C. 9701 et seq.). (4)

Use of interactive programs

The Secretary may encourage institutions to carry out the requirements of this subsection through the use of interactive programs that test the borrower's understanding of the financial literacy information provided through counseling under this subsection, using simple and understandable language and clear formatting. (5)

Model financial literacy counseling curriculum

Not later than 1 year after the date of enactment of the College Literacy in Finance and Economics Act of 2011, the Secretary shall develop a curriculum in accordance with the requirements of paragraph (3), which eligible institutions may use to fulfill the requirements of this subsection. In developing such curriculum, the Secretary may consult with members of the Financial Literacy and Education Commission. .