It is always a challenge to comment on legislation pending in Congress before it becomes law, because until it is enacted, changes can be made during the legislative process. What exists in one form may not be present when the invoice reaches the finish line.
That being said, something recently caught my attention that calls for my efforts to promote financial literacy.
The bill is HR 5779, the Financial Fitness Act (tinyurl.com/bfbdvb6e). It was introduced to the House of Representatives on October 28 by Representative Teresa Leger Fernandez, a Democrat from New Mexico, and co-sponsored by Representative Victoria Spartz, a Republican from Indiana.
The main objective of the bill is as follows: “To amend the Higher Education Act of 1965 to require the Secretary of Education to create an education portal on personal finance on a centralized website of the Ministry of Education. Education Concerning Federal Financial Aid ”.
In other words, this bill would provide a financial education program for those who receive federal student financial assistance. What makes it even more interesting to me is that concepts related to retirement savings will be part of the subjects of the program, which in my opinion is absolutely necessary.
Section 2 of the bill, titled “Results,” states that “Nearly 43,000,000 people owe an average of $ 36,406 in federal student loans, and student loan debt in the United States stands at 1,730 000 000 000 $, that is to say a growth 6 times faster than the national economy. These numbers represent a huge financial impact for 43 million people, which only adds to the need for financial literacy to be an important part of the discussion.
There are other points in the Findings section that relate to the issue of retirement planning. Paragraph six indicates that student debt has increased for the elderly – those nearing retirement – as many of them finance the higher education of their children and grandchildren.
In addition, according to the Findings section, “A little more than 2 in 10 non-retirees under the age of 45 have retirement savings that reach their specific age thresholds. 42 percent of Americans aged 18 to 29 have no retirement savings; 26% of 30-44 year olds; 17% of 45-59 year olds; and 13 percent of people over 60.
This is a problem with long-term repercussions, especially since saving for retirement early in the workforce means you benefit from the mathematics of compound growth, a key component in building a retirement fund. .
In Section 3, the bill asks the Secretary of Education to create an education portal on personal finance within three years of the bill being passed. The portal would be “on a centralized and publicly accessible website of the Ministry relating to federal financial assistance for voluntary use by recipients of assistance granted under this title.” I would be inclined to replace “voluntary” with “mandatory”, given the importance of financial knowledge and planning.
And where does retirement planning fit into the portal? According to the bill, the portal is expected to include “the concept of compound growth as it applies to savings and retirement savings, with information on the different types of retirement savings accounts” . In addition, in the “Managing Student Loan Repayment” section, the bill lists “the interplay between savings and retirement decisions and federal student loan repayment plans”.
Financial literacy education is a must, especially if you are finishing college and heading into a professional field while carrying heavy student debt and trying to plan for the future. At this point, when you need financial literacy most, you might be late – according to the bill, “less than half of states are making personal finance an essential part of basic education.”
It would be nice if all states offered financial education to younger people. In the meantime, a bill like this could make a difference for young and old – provided it gets passed, of course.