[Congressional Record (Bound Edition), Volume 157 (2011), Part 7]
[Senate]
[Pages 9845-9846]
[From the U.S. Government Publishing Office, www.gpo.gov]




                            COLLEGE LIFE ACT

  Mr. AKAKA. Mr. President, yesterday I introduced the College Literacy 
in Finance and Economics Act--the College LIFE Act. This bill is a 
response to the dire need in our country for greater financial literacy 
among young adults.
  To be financially literate is to possess one of the most empowering 
life skills that an individual can have. Those who have a sound 
understanding of personal finance and economics are better prepared for 
the many pivotal moments that they encounter in life where decisions 
about money must be made. Sound decisionmaking in those instances 
separate the financially literate from the financially illiterate. 
Those who effectively evaluate their financial choices, wisely manage 
their personal finances, and budget and save live more financially 
stable and secure lives. Those who make poor decisions about money live 
without financial certainty and become vulnerable to anticonsumer 
business practices and unscrupulous lenders.

[[Page 9846]]

  Financial independence begins during or immediately after college for 
many of us and brings with it new opportunities and challenges. Before 
we buy a home, put a child through school, or retire, we make choices 
about purchasing a car, buying with credit in lieu of cash, and 
balancing our ``wants'' and ``needs'' while struggling to extract rent 
out of our first few paychecks. From that point on, financial choices 
increase in cost and magnitude. Financial decisions made and habits 
developed as young adults dictate whether we go through life on sound 
financial footing and are prepared for unforeseen financial obstacles.
  Given the tremendous importance of early adulthood financial choices 
and actions, it is extremely troubling how unprepared young adults are 
for these challenges. Too few students have opportunities to learn 
about personal finance or economics before they enter college. The 
Council for Economic Education's most recent Survey of the States found 
that only 21 States require students to take a class in economics as a 
requirement for graduation and only 13 require a course in personal 
finance. Parents, moreover, are often unreliable sources of financial 
education because many are financially illiterate themselves. For 
example, the National Foundation for Credit Counseling's fifth annual 
Financial Literacy Survey found that 76 percent of adults recognized 
that they could benefit from the advice of a financial professional 
regarding everyday financial questions.
  Even as we acknowledge widespread financial illiteracy among young 
adults, we allow students in higher education to take on alarming 
levels of debt during college. Borrowing to pay for school has become 
the norm. Two out of every three undergraduates receive some type of 
financial aid. At for-profit colleges, 96 percent of students borrow to 
pay for school. These trends have led to over $100 billion in Federal 
educational loans being originated each year. When these borrowers 
graduate, they do so with significant student loan debt, with the 
median over $23,000. The Department of Education estimates that over 36 
million Americans have outstanding Federal student loan debt that, when 
combined, totals over $740 billion. And yet, because of the steep 
upward trend in college tuition, which in the last decade has risen 
each year by 5.6 percent beyond inflation, students commonly rely on 
credit cards on top of their student loans to pay their way through 
college. Even as far back as 7 years ago, 56 percent of dependent 
students had a credit card in their own name.
  The consequences of this culture of borrowing in higher education are 
clear and concerning. The most recent cohort default rate, CDR, on 
Federal student loans was 7 percent, indicating that large numbers of 
young adults are failing to effectively manage their debt. The average 
CDR for proprietary colleges alone is 22.3 percent. Meanwhile, the 
average student credit card balance rose from around $1,400 in 2002 to 
$2,000 today. Given what we know about student financial literacy and 
capability, this is not surprising. For example, a Charles Schwab study 
in 2007 found that only 45 percent of teens know how to use a credit 
card and even fewer--just 26 percent--understand credit card fees and 
the concept of interest.
  The increase in Federal educational lending and student debt can be 
interpreted positively. I am happy to see young people continuing on to 
college in numbers that I would never have imagined when I graduated 
from the University of Hawaii in 1952. For our best and brightest, 
college continues to be a stepping stone on their paths to becoming 
future leaders. For millions of others today, however, college simply 
and rightfully represents an opportunity for better lives for 
themselves and their families. But, the ever-rising cost of education 
is a reality that we must address. We are allowing--and even 
encouraging--students to become borrowers and consumers. It is our 
responsibility, therefore, to ensure that these young adults have the 
knowledge, skills, and capability to manage the consequences that come 
with their financial decisions. Unfortunately, we are not doing enough.
  The College LIFE Act begins to address this clear and urgent void in 
early adulthood financial literacy and economic education. It would 
provide financial literacy counseling to all university-level students 
who take out federal educational loans when they begin and leave 
school. First receipt of a student loan and departure from school are 
two prime teachable moments in the lives of young adults. In addition, 
they are two opportunities for individuals to learn the importance of 
responsible financial behavior without those lessons coming at their 
own expense.
  Financial literacy counseling under the College LIFE Act would teach 
the financial education core competencies--earning, spending, saving, 
borrowing, and protection--developed by the Financial Literacy and 
Education Commission. Existing loan counseling already provides student 
borrowers with valuable information about the terms, features, and 
common pitfalls of educational loans. This financial literacy 
counseling would complement existing activities, and the College LIFE 
Act specifies that financial literacy loan counseling may be provided 
in conjunction with current counseling requirements.
  I thank my colleague in the House of Representatives, Congresswoman 
Sheila Jackson Lee of Texas, for joining me as the House sponsor of 
this bill. I also thank my colleague from Iowa, Senator Harkin, who 
chairs the Committee on Health, Education, Labor, and Pensions, for 
lending his expertise to this bill in the areas of financial literacy 
and student debt in higher education, including at for-profit colleges.
  I will continue to work with my colleagues to enact the College LIFE 
Act. I call on them to join me in support of this legislation and other 
efforts to improve financial literacy in America.
  Thank you, Mr. President.
  The ACTING PRESIDENT pro tempore. The Senator from Colorado is 
recognized.

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