Mr. Chairman, members of the Committee, my name is Natala Hart, and I am honored to be sitting before you today. As the director of Student Financial Aid at The Ohio State University, I see in our week each day the growing importance of basic financial skills for today’s students. In my opinion, those skills can be as important as the excellent academic knowledge students received at Ohio State.
The matter of financial literacy has emerged as the leading financial concern among parents sending their children to Ohio State. We believe that this is reflective of a national concern about the extensive opportunities for credit, including credit among students still in high school and as young as 16. I myself am a parent of a 13 year old and find it necessary to already begin coaching Katie about credit, and it’s proper and improper uses.
We in the Office of Student Financial Aid entered into a surprising view of the role of credit as we studied the profile of the small number of former OSU students who default on their student loans. What we learned was that the vast preponderance of those who defaulted on their student loans had even higher consumer debt, most often the result of credit card use. We do not know if this usage occurred while in college or after, but it had a dramatic, negative effect on their ability to meet their obligations to repay their federal student loans.
We also learned from our colleagues assisting students in our residence hall system that a small but troubling number of students were arriving at Ohio State deeply in credit card trouble. They defined credit card trouble as being so consumed by concern about paying credit card bills that the students could not adequately focus on their primary purpose of working on their education.
Our colleagues Student Affairs also conducted a study that highlighted the same issues: a very percentage of college students are in credit card debt far too large and proving disruptive to their studies. I have provided Committee staff with a copy of that study by Dr. Andrea Dowhower.
Finally, we were ourselves educated by Dr. Lucia Dunn, an Ohio State economist, who has developed a "Debt Condition Index", part of a "Debt Stress Index" tm that identifies the point at which debt begins to negatively affect the life of Americans.
What are we doing about credit issues?
Ohio State has taken several proactive steps to assist both students who are over their heads in debt or who need to avoid being in that position.
The Ohio State study by Dr. Dowhower has been repeated with results available in the next few months. We know from preliminary findings that fewer students reported reaching the maximums on their credit cards. (In 2000, 73.8% of students had not "maxed out" a credit card; in 2002 the percent increased to 84.3%.) However, that may be because students have higher balances because the amount of their monthly balance hasn't changed too much. Of concern is their response to the balance on the credit cards: In 2000, 26.1% had greater than a $500 balance compared to 23.1% in 2002.
The Ohio State policy to limit credit card solicitation came from a recommendation of our Council on Student Affairs, one of the most important University student, faculty and staff committees. The Council learned that as a public institution governed by Ohio law, we could not totally ban credit card solicitation on campus due to First Amendment law governing commerce. We could, however, limit the "time, place and manner" in which credit card companies approached our students.
The proposal being implemented restricts solicitation to the beginning of academic terms, eliminates solicitation without incentives of limited value such as soda or tee shirts, and defines educational initiatives that will be provided under the terms of the successful contract bidder. We believe that these limits will result in students who chose credit card access for the right reasons.
I’d like to describe our coursework in basic financial education before closing. We have learned through Dr. Mabel Freeman and her staff in our office of First Year Experience that in the transition to college, it is most often the third week of their initial enrollment that students who do not have basic financial skills discover they need those skills. We offer courses in constructing a budget, managing a checking account, good and poor uses of credit cards, and even saving and investing, emphasizing not going into debt as a fundamental component of saving and investing.
Last year, we offered 11 courses at hours convenient to the students. More than 1500 class attendance hours were recorded. Students were required to write one paragraph reflection on what they learned. Examples of their comments (paraphrased) were:
" I learned that completing college is actually the best investment I can make."
"Through the class, it was clear that I should try to avoid credit cards other than for real emergencies."
"I really didn’t understand how to balance a checkbook – and I didn’t want to admit that even to myself."
We believe that financial literacy is a critical component of our students’ educational success and their success as alumni of Ohio State. We would be pleased to assist the Committee as it considers financial education as a requirement for young credit card recipients.
Thank you.
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