The NFEC’s financial literacy act would mandate that students under the age of 18 must take a personal finance course prior to committing to federally-backed student loans. The Act specifies a method for establishing a standardized course and for approving vendors. It also requires the administration of a standardized comprehension test.
The student loan legislation is modeled after the Bankruptcy Reform Act of 2005, which requires debtors to complete a personal finance course prior to the discharge of any debt in bankruptcy. The key difference between the Bankruptcy Reform Act and the College Student Protection and Financial Education Act is that the latter is proactive. The goal of the Act is to help our youth acquire the skills they need to make qualified loan decisions before they get into financial trouble.
1. Operative Language:
The primary operative language of the Act will read as follows: “No lender shall disburse the first installment of a federally-backed student loan unless the borrower has completed an instructional course concerning personal financial management.”
It will include a disclaimer, similar to the Bankruptcy Reform Act, to this effect: “This paragraph shall not apply to a person deemed unable to complete this requirement because of unavailability, disability, or other exigent circumstances.Method for approval of vendors:
A method will be established to approve qualified vendors, and of posting their availability. Qualifications will include some provisions from the Bankruptcy Reform Act, such as requirements that:
- Vendors demonstrate adequate experience and background in providing personal finance courses; and
- The majority of a vendor’s board of directors are independent and not employed by the agency.
2. Standardized Learning Objectives & Testing with Independent Curriculum:
The Act will require that the personal finance curriculum be delivered by educators that completed training to teach personal finance. The curriculum should be made available from independent parties that have no interest in financial services, government or any organization that profits from interest on student loans. One test will be developed to comprehensively demonstrate that the student has understood the key points. Suggested personal finance curriculum lessons include:
- Explaining how interest will be charged
- Reviewing key payback terms
- Practical tools to minimize debt during college and manage payments after graduation
- Key money management lessons to make qualified student loan decisions.
3. Reasonable Fee:
The Act will provide a requirement, similar to the Bankruptcy Reform Act, to this effect: “If a fee is charged for the personal finance course, it shall be a reasonable fee; all agencies shall provide services without regard to ability to pay, and shall provide the course without charge in cases of need.”
This Act is expected to have no fiscal effect, as there are no ($0) taxpayer dollars involved.
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S. 829: Financial Literacy for Students Act. Objective is to integrate financial literacy education into each public elementary and public secondary school within a State that is eligible to receive funds under title I.
H.R. 172: Supporting the goals and ideals of “Financial Literacy Month.” Objective is to support the goals and ideals of Financial Literacy Month; to raise public awareness about the importance of personal financial education in the United States and the consequences that may result from a lack of understanding about personal finances.
H.R. 891: Young Americans Financial Literacy Act. Objective is to establish a grant program within the Bureau of Consumer Financial Protection that funds the establishment of centers of excellence to support research, development and planning, implementation, and evaluation of effective financial literacy education programs for young people and families aged 8 through 24 years old, and for other purposes.
H.R. 1538: National Financial Literacy Act of 2013. Objective is to provide incentives to encourage financial institutions and small businesses to offer continuing financial education to customers, borrowers, and employees, and for other purposes.