Capitol Monitor ....
Congressman J. Randy Forbes, Fourth District of Virginia 

April 27, 2004

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In this Issue

1. Point of View: Co-eds and Credit

2. Finding Financial Aid the Right Way

 

 

::  Point of View  ::

Although they do not think so, many of the decisions that freshman college students make in their first year away from home will not affect them for the rest of their lives. Three of my children have gone through this tumultuous time in their life transitioning from youth to adulthood – and through deciding majors, deciding classes, and deciding which organizations to join – my wife and I have reminded them that while getting their degree and staying focused on their schoolwork is important, which class they take or which group they join won’t chart their course for the rest of their lives. 

There is a decision, however, that many freshman college students are increasingly making that is having a big impact on the rest of their lives: the decision to apply for a credit card.

According to Consumers for Responsible Credit Solutions (CRCS), a nationwide coalition of consumers who have benefited from credit counseling, there has been a rapid rise in teens and young college students racking up credit card debt. 

Studies have shown that nearly three-quarters of undergraduates have credit cards in their names. The average balance due on a student’s credit cards combined was a $3,100. And, perhaps most amazingly, three out of five students with credit cards had already maxed them out before completing their freshman year of college. For students who have little or no income during their college years, these are serious decisions that have implications for the rest of their lives. The consequences have been unsurprising. In 2000, 120,000 young people under age 25 filed for personal bankruptcy - a 50% increase from just a decade ago. Thousands more will ruin their credit and make it difficult to purchase a home or business for years to come. These are smart kids, making bad decisions. The question is: why?

According to a recent study, the marketing of credit cards has shifted rapidly over the last five years from college upperclassmen to college freshmen and even high school seniors. Students are offered free pizzas, tee-shirts, dorm gear and even cash in exchange for a completed credit card application. Credit card companies employ other students to sell these credit cards to their friends. 

Co-ed credit card debt is just one piece of the $735 billion in personal debt that Americans hold, however. In 2003, the average household possessed 7 credit cards. Combined, these cards total an average balance of $9,450. Furthermore, the average savings rate is in the single-digits. For a society in which many individuals are nearing retirement age, this is a very dangerous trend.

The key to addressing these issues is education. Financial education and literacy has been linked to lower delinquency rates for mortgage borrowers, higher participation and contribution rates in retirement plans, improved spending and saving habits, higher net worth, and knowledge, attitude and behavior changes.

Tonight the House passed a resolution designating April 2004, as “Financial Literacy Month.” The resolution calls for the federal government, states, localities, schools, nonprofit organizations, businesses, and the American people to work together to raise public awareness about the importance of financial education in the United States and the serious consequences that may be associated with a lack of understanding about personal finances. 

Late last year Congress also passed the Fair and Accurate Credit Transactions Act, which, in addition to helping Americans tackle such issues as identity theft, consumer disputes, accurate reporting of financial records and access to consumer credit information, created the Financial Literacy and Education Commission.

The goal of the commission is to encourage financial education and to improve the financial literacy level of consumers in the United States. The commission intends to work with the public and private sectors to determine the best way to educate the public on financial issues. In addition to promoting financial literacy, the commission will establish a Web site that will serve as a clearinghouse to announce education programs and grant funding opportunities, and to establish a toll-free hotline that will provide financial literacy information to the public.

America has always been a of land great economic opportunity. With the information age in high gear, we have access to a wide variety of financial tools that can help us save and invest, pay our bills conveniently and quickly, manage our money and ensure our families are well provided for in the case of emergency. Whether we are considering major purchases like cars, homes and college educations, or just purchasing a product at the local convenience store, we have many financial vehicles to choose from. But with options, come risks. The benefits of financial choices can quickly become roadblocks and liabilities to those who lack a basic financial education.

While studies show that our nation’s youth and college-aged students and those considering retirement are in most in need of financial education, financial literacy is a fundamental need for all 21st century Americans. I hope you will join me in recognizing Financial Literacy Month for the important message it carries. When we do not understand the benefits as well as the risks of the many financial tools at our disposal, we are less likely to achieve our full economic potentials. We are unable to reap the full benefits of our hard-earned income, savings, or investments. This is true for us not just as individuals, but collectively it is true for us as communities, as states and as a nation. 

:: Finding Financial Aid the Right Way ::

For the past two decades, college tuition and fees have been rising more rapidly than household income. And recently, financial strains from state budget crises coupled with an increased demand for college education, have left families all across the nation facing double-digit increases in college tuition and fees. 

For those currently seeking a college education, it can be difficult enough to maneuver the college admissions process, let alone find a way to pay for four years of tuition, room and board. With today's cost of a college education, many people are looking for financial aid. Unfortunately, in their efforts to pay the bills, many students and their families are falling prey to scholarship scams. 

The Federal Trade Commission cautions students to look for tell tale lines:

Scholarship Scams

 "The scholarship is guaranteed or your money back." 

"You can't get this information anywhere else." 

"I just need your credit card or bank account number to hold this scholarship." 

 "We'll do all the work." 

 "The scholarship will cost some money." 

"You've been selected by a 'national foundation' to receive a scholarship" or "You're a finalist" in a contest you never entered. 

To learn more about your options for paying for college join me for a free seminar hosted by the Sallie Mae Foundation.

Paying for College Seminar
Saturday May 15, 2004
10 a.m.
Oscar Smith High School
1994 Tiger Drive
Chesapeake, VA 22320 


For Internet resources on paying for college visit my Student Financial Aid Resources website.

YOUR BOTTOM LINE ....

Consumer Credit Cost Calculator

Plug in a purchase price and an annual percentage rate; with an assumption only minimum monthly payments are made, this calculator will show you how long it will take you to pay it off, as well as how much more you'll pay in interest.

From Consumers for Responsible Credit Solutions

SPECIAL EVENT ....

"Paying for College" 

Join me for a free seminar hosted by the Sallie Mae Foundation on paying for college.

Saturday May 15, 2004
10 a.m.
Oscar Smith High School
1994 Tiger Drive
Chesapeake, VA 22320 

ON THE HILL ....

Current Floor Proceedings

Bills Coming Up This Week

Monthly Whip Calendar

OFFICE LOCATIONS ....

307 Cannon House Office Building
Washington, DC 20515
202.225.6365

505 INDEPENDENCE PKWY, SUITE 104
Chesapeake, VA 23322
757.382.0080

2903 Boulevard, Suite B
Colonial Heights, VA 23834
804.526.4969

425 H. South Main Street
Emporia, VA 23847
434.634.5575

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