Director of the Consumer Financial Protection Bureau
Financial Literacy and Education Commission Meeting
October 23, 2013
Thank you all for joining us here today. It has long been ingrained in the fabric of our country that if you work hard, study well, and act responsibly, you can get ahead in life. In fact, that is why all of us are here—to help ensure that idea remains true. Benjamin Franklin once said, “An investment in knowledge always pays the best interest.” From a young age, we impress upon our children that education can be an important milestone on the pathway to opportunity. That has been true in my own life, and I am sure it is true for many people here in this room.
But earning a college degree has the potential to become more of a burden than a blessing for those saddled with unmanageable debt in a tough employment market. With outstanding student debt topping $1 trillion, the topic of our meeting today is incredibly vital. Students need to “know before they owe.” They need to understand the costs of higher education and make responsible decisions about the programs they choose and they debt they take on.
And the costs of higher education are not limited to student loans. Young consumers shop for a range of financial products as they choose how to pay for college. They must try to choose the best products with limited information while navigating campus-based marketing for bank accounts, debit cards, and prepaid cards. And some of our colleges and universities, whether well-intentioned or not, may be encouraging or even requiring students to use financial products that do not offer them the best deals.
At the Consumer Bureau, we have an entire team dedicated to helping students and young consumers make informed financial choices about paying for college. Together with the Department of Education, we put together the Financial Aid Shopping Sheet. The shopping sheet is a simple, common-sense form that lays out the total cost of attendance including tuition, fees, and other expenses. It also details the options students have for grants and loans.
The form can help students understand how much debt they may have after graduation and what their monthly payment could look like. In doing all of this, it enables prospective students to compare one college offer to another. And thus far, 1,600 colleges have adopted the Financial Aid Shopping Sheet. On top of that, our website has further resources on choosing student loans, managing debt, and banking products on campus.
We also have a team dedicated to improving the financial capacity of consumers. Earlier this year, we released our policy recommendations for youth financial education – starting in kindergarten and continuing through the end of high school. We want to see financial education topics integrated into school curricula. We believe this education should begin at a young age and continue through graduation.
If students participate in experiential learning early on, they may be more likely to retain that knowledge over time because they can apply the concepts to what is actually happening in their lives. In fact, at the recent FLEC hearing in Madison, we heard from one student who spoke about how a school-based banking program taught him much more than simply learning about banking in a classroom setting. That student is now in college studying finance, and we would like to hear the kind of story he told us more often.
Financial education in schools is critical, but enormous benefits also exist when that education starts at home. We want parents to be engaged as their children learn to master the concepts of personal financial management. Research has demonstrated that if parents engage their children by establishing a savings account for them, the children are seven times more likely to attend college than those without a savings account.
We want to see every youth, regardless of income, develop financial skills and access services that will help them better navigate the complex financial marketplace. We are particularly looking towards summer youth employment programs as a way to engage youth, teach them about financial services, and provide them with opportunities to practice new skills by working with financial partners. Many of the young adults who participate in these types of employment programs are low-income and live in underserved communities. Through our efforts with these programs and others, we plan to reach a larger segment of the vulnerable youth population at a critical time when they are receiving a paycheck, many for the first time. Our ongoing work will focus on developing best practices and providing technical assistance to communities that want to implement these programs.
Today is a great opportunity for all of us to develop a coordinated policy framework that can provide young people with the information, experience, and results they need to make responsible financial decisions—about higher education and otherwise. Our collaboration can help ensure that every young American can gain the knowledge, skills, and resources required to build healthy financial futures.
At the Consumer Bureau, our goal is to give all consumers the confidence and peace of mind that the financial world is not full of pitfalls that will ruin their lives. The best and most immediate form of consumer protection is self-protection: being able to avoid problems in the first place and to know what you can do about it when you do experience a problem. We are glad to join with everyone who shares these same convictions, and I look forward to today’s conversations. Thank you.
The Consumer Financial Protection Bureau (CFPB) is a 21st century agency that helps consumer finance markets work by making rules more effective, by consistently and fairly enforcing those rules, and by empowering consumers to take more control over their economic lives. For more information, visit www.consumerfinance.gov.