To amend the Higher Education Act of 1965 to enhance literacy in finance and economics, and for other purposes.

November 25, 2003

Mr. ENZI (for himself, Mr. AKAKA, Mr. CORZINE, and Mr. SARBANES) introduced the following bill; which was read twice and referred to the Committee on Health, Education, Labor, and Pensions

To amend the Higher Education Act of 1965 to enhance literacy in finance and economics, and for other purposes.

Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

This Act may be cited as the `Financial Literacy in Higher Education Act'.

SEC. 2. AREAS OF EMPHASIS.

Part B of title I of the Higher Education Act of 1965 (20 U.S.C. 1011 et seq.) is amended by adding at the end the following:

`SEC. 123. AREAS OF EMPHASIS.

`In carrying out activities under this Act related to improving financial and economic literacy, education, and counseling, the Secretary shall emphasize, among other elements, basic personal income and household money management and financial planning skills, and basic economic decision making skills, including how to--

`(1) create household budgets, initiate savings plans, and make strategic investment decisions for education, employment, retirement, home ownership, wealth building, or other savings goals;

`(2) manage credit and debt effectively, including student financial aid and credit card debt, and understand the merits of establishing and maintaining excellent credit history;

`(3) understand, evaluate, and compare fair and favorable financial products, services, and opportunities, and avoid abusive, predatory, or deceptive financial products, services, and opportunities;

`(4) complete tax returns and understand tax consequences when making certain financial decisions, such as placing an investment or purchasing a home;

`(5) identify economic problems, alternatives, benefits, and costs;

`(6) analyze the incentives at work in an economic situation;

`(7) examine the consequences of changes in economic conditions and public policies;

`(8) collect and organize economic evidence, including understanding, evaluating, and making strategic decisions using economic indicators;

`(9) compare benefits with costs; and

`(10) improve financial and economic literacy and education through all other related skills.'.

SEC. 3. COORDINATION.

In carrying out the financial and economic literacy activities authorized under this Act and the amendments made by this Act, the Secretary of Education, to the greatest extent practicable, shall coordinate such activities with the financial and economic literacy efforts of a Federal commission comprised of the following:

(1) The Secretary of the Treasury.

(2) The respective head of each of the following:

(A) Each of the Federal banking agencies (as defined in section 3 of the Federal Deposit Insurance Act (12 U.S.C. 1813)).

(B) The National Credit Union Administration.

(C) The Securities and Exchange Commission.

(D) Each of the Departments of Education, Agriculture, Defense, Health and Human Services, Housing and Urban Development, Labor, and Veterans Affairs.

(E) The Federal Trade Commission.

(F) The General Services Administration.

(G) The Small Business Administration.

(H) The Social Security Administration.

(I) The Commodity Futures Trading Commission.

(J) The Office of Personnel Management.

(3) At the discretion of the President, not more than 5 individuals appointed by the President from among the administrative heads of any other Federal agencies, departments, or other Government entities, whom the President determines to be engaged in a serious effort to improve financial literacy and education.

SEC. 4. ENHANCEMENT OF FINANCIAL LITERACY AND ECONOMIC LITERACY.

The Higher Education Act of 1965 (20 U.S.C. 1001 et seq.) is amended--

(1) in section 201(a)(3), by inserting `personal finance,' after `economics,';

(2) in section 311(c)--

(A) by redesignating paragraphs (7) through (12) as paragraphs (8) through (13), respectively; and

(B) by inserting after paragraph (6) the following:

`(7) Education or counseling services designed to improve the financial literacy and economic literacy of students and their parents.';

(3) in section 316(c)(2)--

(A) by redesignating subparagraphs (G) through (L) as subparagraphs (H) through (M), respectively;

(B) by inserting after subparagraph (F) the following:

`(G) education or counseling services designed to improve the financial literacy and economic literacy of students and their parents;'; and

(C) in subparagraph (M), as redesignated by subparagraph (A), by striking `subparagraphs (A) through (K)' and inserting `subparagraphs (A) through (L)';

(4) in section 317(c)(2)--

(A) in subparagraph (G), by striking `and' after the semicolon;

(B) in subparagraph (H), by striking the period at the end and inserting `; and'; and

(C) by adding at the end the following:

`(I) education or counseling services designed to improve the financial literacy and economic literacy of students and their parents.';

(5) in section 323(a)--

(A) by redesignating paragraphs (7) through (12) as paragraphs (8) through (13), respectively; and

(B) by inserting after paragraph (6) the following:

`(7) Education or counseling services designed to improve the financial literacy and economic literacy of students and their parents.';

(6) in section 326(c)--

(A) by redesignating paragraphs (5) through (7) as paragraphs (6) through (8), respectively; and

(B) by inserting after paragraph (4) the following:

`(5) education or counseling services designed to improve the financial literacy and economic literacy of students and their parents;';

(7) in section 503(b)--

(A) by redesignating paragraphs (5) through (14) as paragraphs (6) through (15), respectively; and

(B) by inserting after paragraph (4) the following:

`(5) Education or counseling services designed to improve the financial literacy and economic literacy of students and their parents.';

(8) in section 402B(b)--

(A) by redesignating paragraphs (3) through (10) as paragraphs (4) through (11), respectively;

(B) by inserting after paragraph (2) the following:

`(3) education or counseling services designed to improve the financial literacy and economic literacy of students and their parents;'; and

(C) in paragraph (11), as redesignated by subparagraph (A), by striking `paragraphs (1) through (9)' and inserting `paragraphs (1) through (10)';

(9) in section 402C--

(A) in subsection (b)--

(i) by redesignating paragraphs (2) through (12) as paragraphs (3) through (13), respectively;

(ii) by inserting after paragraph (1) the following:

`(2) education or counseling services designed to improve the financial literacy and economic literacy of students and their parents;'; and

(iii) in paragraph (13), as redesignated by clause (i), by striking `paragraphs (1) through (11)' and inserting `paragraphs (1) through (12)'; and

(B) in subsection (e), by striking `subsection (b)(10)' and inserting `subsection (b)(11)';

(10) in section 402D(b)--

(A) by redesignating paragraphs (2) through (10) as paragraphs (3) through (11), respectively;

(B) by inserting after paragraph (1) the following:

`(2) education or counseling services designed to improve the financial literacy and economic literacy of students and their parents;'; and

(C) in paragraph (11), as redesignated by subparagraph (A), by striking `paragraphs (1) through (9)' and inserting `paragraphs (1) through (10)';

(11) in section 402E(b)--

(A) by redesignating paragraphs (7) and (8) as paragraphs (8) and (9), respectively; and

(B) by inserting after paragraph (6) the following:

`(7) education or counseling services designed to improve the financial literacy and economic literacy of students and their parents;';

(12) in section 402F(b)--

(A) by redesignating paragraphs (4) through (10) as paragraphs (5) through (11), respectively;

(B) by inserting after paragraph (3) the following:

`(4) education or counseling services designed to improve the financial literacy and economic literacy of students and their parents;'; and

(C) in paragraph (11), as redesignated by subparagraph (A), by striking `paragraphs (1) through (9)' and inserting `paragraphs (1) through (10)';

(13) in section 404D(b)(2)(A)(ii), by striking `and academic counseling' and inserting `academic counseling, and financial literacy and economic literacy education or counseling';

(14) by striking section 418A(c)(1)(B)(i) and inserting the following:

`(i) personal, academic, career, and economic education or personal finance counseling as an ongoing part of the program;';

(15) in section 428F, by adding at the end the following:

`(c) FINANCIAL AND ECONOMIC LITERACY- Where appropriate, each program described under subsection (b) shall include making available financial and economic education materials for the borrower.';

(16) in section 432(k)(1), by striking `and offering' and all that follows through the period and inserting `, offering loan repayment matching provisions as part of employee benefit packages, and providing employees with financial and economic education and counseling.';

(17) in section 441(c)--

(A) in paragraph (1), by inserting `financial literacy and economic literacy,' after `social services,'; and

(B) in paragraph (4)(C), by striking the period at the end and inserting `and counseling for the purposes of improving financial literacy and economic literacy.';

(18) in section 485--

(A) in subsection (a)(1)(D), by striking the semicolon at the end and inserting `, including the merits of taking a personal finance course, if the institution offers such a course, and of the student reviewing the student's personal credit profile not less frequently than once a year;';

(B) in subsection (b)--

(i) in paragraph (1)(A)--

(I) in clause (i), by striking `and' after the semicolon;

(II) in clause (ii), by striking the period at the end and inserting `; and'; and

(III) by adding at the end the following:

`(iii) if it is determined during the counseling that the borrower is not connected to a mainstream financial institution, information about low-cost financial services and the benefits of using such services, and where and how the borrower could open a low-cost account in a federally insured credit union or bank.'; and

(ii) by adding at the end the following:

`(3) PILOT PROGRAM-

`(A) AUTHORIZATION-

`(i) IN GENERAL- The Secretary shall establish a pilot program that awards a total of 5 grants to 5 different institutions of higher education that are located in geographically different parts of the United States to enable the institutions to provide annual personal finance counseling for students enrolled at such institutions.

`(ii) MINORITY SERVING INSTITUTIONS- In awarding grants under this paragraph, the Secretary shall award not less than 2 of the 5 grants to institutions of higher education that are eligible to receive assistance under title III or title V.

`(B) APPLICATION- An institution of higher education that desires to receive a grant under this paragraph shall submit an application to the Secretary at such time, in such manner, and containing such information as the Secretary may require.

`(C) USE OF FUNDS-

`(i) COUNSELING-

`(I) IN GENERAL- In addition to making available exit counseling under paragraph (1), an institution of higher education that receives a grant under this paragraph shall through financial aid officers or otherwise, make available counseling to borrowers of loans which are made, insured, or guaranteed under part B (other than loans made pursuant to section 428B) of this title or made under part D or E of this title at the commencement of the borrower's course of study at the institution, not less frequently than once annually while the borrower is enrolled at the institution, and not later than 30 days after completion of the course of study for which the borrower enrolled at the institution or at the time of departure from such institution.

`(II) CONTENT- The counseling required under subclause (I) shall include the average anticipated monthly repayments, a review of the repayment options available, the total amount of interest that would be paid over a range of possible interest rates and the amount of interest in the monthly payments, information on the availability and content of a personal finance course if such course is offered by the institution and if not already completed by the individual, and such debt and management strategies as the institution determines are designed to facilitate the repayment of such indebtedness, which may be implemented in partnership with State or local public, private, and nonprofit

entities approved by the local educational agency that serves schools in the area where the institution is located, or a campus committee formed for the purpose of evaluating the qualifications of such entities. If it is determined during the counseling that the borrower is not connected to a mainstream financial institution, the counseling shall include information about low-cost financial services and the benefits of using such services, and where and how the borrower could open a low-cost account in a federally insured credit union or bank.

`(ii) PERMISSIVE USE- Grant funds received under this paragraph may be used to pay for additional financial aid personnel or for training for existing financial aid personnel.

`(iii) STUDY-

`(I) IN GENERAL- An institution of higher education that receives a grant under this paragraph shall conduct a study to evaluate the impacts, if any, of the financial and economic literacy and counseling activities on students' levels of savings and indebtedness, and creditworthiness, and such activities' effectiveness in reducing the incidence of problems with handling credit, including bankruptcy filing and student financial loan default.

`(II) ASSISTANCE- An institution of higher education may conduct the study under subclause (I) with the assistance of appropriate Federal agencies or other entities approved by the Secretary.

`(III) REPORT- Not later than 6 months after completion of the study under subclause (I), the institution of higher education shall report the results of such study to the Secretary, the Secretary of the Treasury, the Committee on Health, Education, Labor, and Pensions of the Senate, the Committee on Banking, Housing, and Urban Affairs of the Senate, the Committee on Education and the Workforce of the House of Representatives, and the Committee on Financial Services of the House of Representatives.

`(D) DURATION- Grants awarded under this paragraph shall be for a period of 3 years.

`(E) AMOUNT- The Secretary shall award grants of not more than $1,000,000 annually to each institution of higher education awarded a grant under this paragraph. The Secretary may determine the grant award amount based on the number of students to be counseled at the institution of higher education.

`(F) REPORT- Not later than 90 days after the date of completion of the pilot program under this paragraph, the Secretary shall submit a report to Congress on the effectiveness of the program.

`(G) AUTHORIZATION OF APPROPRIATIONS- There is authorized to be appropriated to carry out this paragraph such sums as may be necessary for each of fiscal years 2005 through 2009.'; and

(C) in subsection (c), by adding at the end the following: `Appropriate Federal agencies shall provide material developed by such agencies for the purpose of financial education, to financial assistance information personnel at institutions of higher education for the use of such personnel in financial aid counseling.'; and

(19) in section 491(d)(8), by inserting `, including those related to financial literacy activities,' after `resources and services'.

SEC. 5. EVALUATION.

Not later than 6 years after the date of enactment of this Act, the Comptroller General of the United States shall submit to the Committee on Health, Education, Labor, and Pensions of the Senate, the Committee on Banking, Housing, and Urban Affairs of the Senate, the Committee on Education and the Workforce of the House of Representatives, and the Committee on Financial Services of the House of Representatives, an evaluation of the range and effectiveness of financial and economic education and financial aid counseling activities of institutions of higher education, lenders, servicers, and guaranty agencies as emphasized by the Secretary of Education pursuant to section 123 of the Higher Education Act of 1965.

END