Mr. President, I rise to reintroduce comprehensive legislation aimed at addressing the issue of economic and financial illiteracy on college campuses. I am referring to the worrisome problems of skyrocketing debt levels, low rates of saving, and the proliferation of unchecked predatory practices by unscrupulous financial institutions among young adults who hold our country's future in their hands. Entitled the College LIFE or College Literacy In Finance and Economics Act, this bill has the support of Senators Sarbanes and Corzine. I thank my colleagues from Maryland and New Jersey for joining me as original cosponsors of this measure. I also thank Senator Enzi, the Chairman of the Health, Education, Labor, and Pensions Committee, for working with me on financial literacy as it affects all constituencies, including college students.
The problem we are working to address with the College LIFE Act is simple. Our college students are many of America's best and the brightest and will go on to become leaders--in business, education, politics, the military, the community--any area you can name. I find it wonderful that many young people are fulfilling their dreams of higher education in numbers that I did not imagine when I was in college. In fact, as reported by the Census Bureau, college enrollment was estimated at 15.9 million for the current school year, compared to 5.7 million in 1965 when the Higher Education Act was enacted. However, I am gravely concerned, both as a member of this body and particularly as a grandparent and great-grandparent, that our young people are entering college without proper direction or good skills for money management or economic decisionmaking.
As we work on increasing access to higher education, we must give students access to tools needed to make sound economic and financial decisions once they are on campus; however, the lack of personal finance and economics standards or implementation of existing standards in elementary and secondary education in a number of States results in many students arriving at college with little understanding of economic concepts like supply and demand or benefits versus costs, or personal finance concepts such as household money management or the importance of maintaining good credit history. Without this basic understanding, college students are not effectively evaluating credit alternatives, managing their debt, and preparing for long-term financial goals, such as saving for a home or retirement.
Imagine life from the point of view of a college student. A young adult leaves his home and travels many miles--thousands of miles in the case of Hawaii students attending mainland colleges--to the campus that holds his hopes and dreams. Perhaps he is not being mindful of how much money he needs for textbooks, school supplies, or student fees. He visits the campus bookstore and walks out with a bag that includes a preapproved credit card application, which he immediately completes and sends. Months later, he has joined other credit card-holding college students who, on average, have credit card balances above $3,000. Sophomore year rolls around and, instead of conferring with his parents about the details of his renewal FAFSA for student financial aid or master promissory note, he is saddled with another $20,000 loan. According to the Census Bureau, average college tuition, room, and board have increased to $29,119 for a four-year private institution and to $9,953 for a 4-year public institution. The same scenario repeats itself in junior and senior year. Finally, after completing all coursework, he graduates, finds an entry-level job, and realizes that, after servicing his debt, he has little left to spend on basics such as food, transportation, and rent, much less career clothing or a new briefcase. His lack of knowledge about how to properly use credit has led him to anxiety-causing financial missteps. With appropriate financial and economic literacy, he may have known what debt load to anticipate and made wiser financing and spending decisions while in school.
Instead, she may be on the road to true financial trouble. A U.S. Public Interest Research Group and Consumer Federation of America analysis of Federal Reserve data indicates that the average household with debt carries approximately $10,000 to $12,000 in total revolving debt and has nine credit cards. From January through September of 2004, approximately 1.2 million consumers filed for bankruptcy, keeping pace with last year's record level, which is almost half of the number of college diplomas expected to be conferred this year at 2.5 million. Furthermore, the Federal Reserve Board reports that Americans currently pay more than 13 percent of after-tax income to service their debts. We must ensure that our youth make the right decisions to follow a better financial path. This is especially in light of a report cited by Dan Iannicola, Jr., Deputy Assistant Secretary of the Treasury for Financial Education, at a House hearing last Congress, noting that youths spent more than $172 billion in a recent year, and figures from MarketResearch.com noting that typical 8- to 14-year-olds spend--from allowances, jobs, and gifts--nearly $1,300 a year or $25 a week.
The College LIFE Act represents a comprehensive approach to assist upcoming generations of Americans. It proposes four new grant programs that provide resources to encourage experimentation with delivery systems--innovative methods used in or out of the classroom to increase college students' financial literacy. Another grant would allow higher education institutions to share best practices about or create personal finance courses where none exist. A third grant would assist efforts that are looking at the best ways to integrate personal finance and economic education into basic educational subjects, which is especially important as schools are facing challenges under the No Child Left Behind Act and are tempted to focus on subjects being tested for Adequate Yearly Progress. The final grant would train teachers and high school counselors toward increasing financial and economic literacy in grades K-12 so that our college students are prepared when they arrive at college campuses.
The bill also proposes a pilot program for five higher education institutions to encourage students to take a personal finance course and participate in preventive annual credit counseling, working in conjunction with state or local public, private, and nonprofit entities selected by the local education agency or the school, and measuring the effectiveness of efforts in any behavioral changes that may result. It promotes greater collaboration with and support from Federal agencies in the form of the Financial Literacy and Education Commission. Finally, the measure emphasizes the importance of personal finance and economic education and counseling by authorizing these activities as allowable uses in existing Higher Education Act programs, such as TRIO, GEAR UP, and Title III and Title V Serving Institutions.
Furthermore, I intend the reach of this bill to be beyond the traditional college student. Our returning college students are a vital part of society--many who are already community leaders and breadwinners for their families who have already gained valuable work experience that they may use as they learn a new field or continue their undergraduate study in the pursuit of a graduate or doctoral degree. In addition, older adults who are entering higher education for the first time can also be lauded for their enterprising spirit in wanting to better their lives by earning an associates or bachelors degree. I anticipate that the assistance provided through the College LIFE Act will work to provided needed help to many of these students as well.
I am looking forward to continuing to work with my colleagues to have the College LIFE Act passed or included in the upcoming Higher Education Act reauthorization. I encourage my colleagues' support for this bill.
