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Enhanced Financial Counseling for Young Adults

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Wednesday, March 20, 2019

In September, 2018, Congress voted on a bill that would improve financial counseling for student borrowers — online or in-person sessions for any student with a federal loan or a grant. The full House passed the Empowering Students through Enhanced Financial Counseling Act, H.R. 1635. The law is aimed at improving financial literacy at a time when student debt is topping $1.4 trillion, and default rates keep growing.

House Speaker Paul Ryan said regarding the new law that “college should be an opportunity for all those who want it. But with a complex federal financial aid system that provides little guidance to students, it’s often out of reach or leads to high student debt. Instead of this status quo, we should support students as they make decisions about how to finance their education and begin to repay their loans.”

With this bill, he continued, “students and parents enrolled in federal loan programs will receive yearly counseling tailored to their needs.” 

The need for financial literacy for American youth is greater than ever. Only 20 states currently mandate that high school students take economics. This trend is concerning, considering the fact that less than 30% of young adults achieve a score above 70% on financial literacy tests, and the average score was just 58%. [4]

Most high school level students don’t need to know about complex investments and high-level financial concepts, but they most certainly need to know the basics, like how to open a bank account, how much they need to save each month to reach their goals and, if they borrow this amount of money, how much money they will need to earn to pay it back.

Immediate skills that have direct application to their lives are what is needed. It’s not very useful to teach a 16-year old about the complexity of mortgages, because the likelihood of their taking out a home loan in the next few years is very slim. So that knowledge, not having any direct application to their daily lives, will probably be forgotten soon after they take their exam on the subject, but they will need to know about how to live on a budget and balance their checkbook. That’s something that will be useful on an almost immediate basis. And developing healthy financial habits early is the key.

Bad money habits can have damaging, long-term consequences for our financial security.  Developing healthy financial habits can do wonders for helping us achieve our long-term goals like saving enough for retirement or paying for a college education.

 

IMPORTANT DISCLOSURES

 

Material contained in this article is provided for information purposes only and is not intended to be used in connection with the evaluation of any investments offered by David Lerner Associates, Inc. This material does not constitute an offer or recommendation to buy or sell securities and should not be considered in connection with the purchase or sale of securities.

To the extent that this material concerns tax matters, it is not intended or written to be used, and cannot be used, by a taxpayer for the purpose of avoiding penalties that may be imposed by law.

Each taxpayer should seek independent advice from a tax professional based on his or her individual circumstances.

These materials are provided for general information and educational purposes based upon publicly available information from sources believed to be reliable-- we cannot assure the accuracy or completeness of these materials. The information in these materials may change at any time and without notice.

David Lerner Associates does not provide tax or legal advice. The information presented here is not specific to any individual's personal circumstances. Member FINRA & SIPC

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Founded in 1976, David Lerner Associates is a privately-held broker/dealer with headquarters in Syosset, New York and branch offices in Westport, CT; Boca Raton, FL; Lawrenceville, NJ; and White Plains, NY. For more information contact David Lerner Associates Call 800-367-3000 Visit our website: www.davidlerner.com

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