Monday, May 31, 2010

College Board Study Discovers that Many Community College Students Do Not Apply for Financial Aid

Source: College Board

New College Board Report Finds Millions in Financial Aid Go Unclaimed at Community Colleges

Low- and Moderate-Income Students Lack the Advice that Could Bring Them into the U.S. Workforce

The study, The Financial Aid Challenge: Successful Practices that Address the Underutilization of Financial Aid in Community Colleges, conducted in collaboration with the American Association of Community Colleges (AACC) showed that:

  • In the 2007-08 academic year, 58 percent of Pell Grant-eligible students who attended community colleges either full or part-time applied for federal financial aid, compared with 77 percent of eligible students at four-year public institutions;
  • During the two-year period from fall 2007 to fall 2009, full-time enrollment at U.S. community colleges increased by 24.1 percent;
  • Students are reluctant to apply for aid in part due to a lack of basic understanding, inconsistent or inaccurate information, distrust of government agencies, difficulty using resources during designated hours and a lack of human or technological resources on campus.

College Board Study on Student Financial Debt

Source: College Board

College Board Brief Focuses on Students with High Levels of Debt

Who Borrows Most? found that, of the 66% of bachelor’s degree recipients who graduated with debt, 25% borrowed $35,500 or more. High debt does not necessarily indicate that a student will have difficulty repaying the debt; many students with relatively low debt may struggle because of weak earnings or failure to complete a certificate or degree program. For example, the 10% of associate degree recipients who graduated with more than $20,400 in debt may be at least as vulnerable as the bachelor’s degree recipients with twice as much debt.

Thursday, May 27, 2010

RAND Report on Financial Literacy Programs

Source: RAND

Federal Financial and Economic Literacy Education Programs, 2009

By: Angela A. Hung, Kata Mihaly, Joanne K. Yoong

Financial literacy — the ability to use knowledge and skills to manage financial resources effectively for a lifetime of financial well-being — is becoming more and more important as individuals and families become increasingly responsible for their own long-term financial well-being. Financial and economic literacy education programs have been shown to increase financial literacy and capability. Many federal agencies and departments have long-standing financial education programs, and, in recent years, steps have been taken to increase coordination of such efforts. In late 2009, a survey was conducted of 21 federal agencies, who reported offering a total of 56 financial and economic literacy education programs. In this report, the authors analyze the survey data, describing each program's purpose, content, delivery formats, target audience, and evaluation goals and method. The authors conclude with recommendations for future evaluations, emphasizing the need for a standardized definition of what constitutes a financial and economic literacy education program and for a standardized method of evaluating such programs across agencies.

Read more.

Monday, May 24, 2010

FRB Launches New Credit Card Site

Source: Federal Reserve Board

As a consumer, it pays to be smart when choosing and using a credit card. This site--maintained by the Federal Reserve Board, whose goal is to protect the credit rights of consumers--provides a basic guide to navigating the credit card process. Stay tuned during the coming months as we add additional features and information.

Site Link

Financial Fraud Enforcement Task Force Launches

Source: Department of Justice

President Obama’s Financial Fraud Enforcement Task Force today announced the launch of is a one-stop shop for the American people to learn how to protect themselves from fraud and to report it wherever - and however - it occurs. It will also serve as a hub of information about the task force’s work.

Factors Affecting the Financial Literacy of Individuals with Limited English Proficiency

Source: GAO

Consumer Finance: Factors Affecting the Financial Literacy of Individuals with Limited English Proficiency

GAO-10-518 May 21, 2010

Highlights Page (PDF)   Full Report (PDF, 31 pages)   Accessible Text


According to Census data, more than 12 million adults in the United States report they do not speak English well or at all. Proficiency in reading, writing, speaking, and understanding the English language appears to be linked to multiple dimensions of adult life in the United States, including financial literacy--the ability to make informed judgments and take effective actions regarding the current and future use and management of money. The Credit Card Accountability, Responsibility and Disclosure Act of 2009 mandated GAO to examine the relationship between fluency in the English language and financial literacy. Responding to this mandate, this report examines the extent, if any, to which individuals with limited English proficiency are impeded in their financial literacy and conduct of financial affairs. To address this objective, GAO conducted a literature review of relevant studies, reports, and surveys, and conducted interviews at federal, nonprofit, and private entities that address financial literacy issues and serve people with limited English proficiency. GAO also conducted a series of focus groups with consumers and with staff at community and financial organizations. GAO makes no recommendations in this report.

Dependency Ratio Expected to Increase

Source: U.S. Census Bureau

Aging Boomers Will Increase Dependency Ratio, Census Bureau Projects

Older American Population to Become More Diverse

     The U.S. Census Bureau reported today that the dependency ratio, or the number of people 65 and older to every 100 people of traditional working ages, is projected to climb rapidly from 22 in 2010 to 35 in 2030. This time period coincides with the time when baby boomers are moving into the 65 and older age category. After 2030, however, the ratio of the aging population to the working-age population (ages 20 to 64) will rise more slowly, to 37 in 2050. The higher this old-age dependency ratio, the greater the potential burden.

Read more.

Tuesday, May 18, 2010

The Role of Financial Literacy in the Subprime Mortgage Crisis

Source: Federal Reserve Bank of Atlanta

Financial Literacy and Subprime Mortgage Delinquency: Evidence from a Survey Matched to Administrative Data

The exact cause of the massive defaults and foreclosures in the U.S. subprime mortgage market is still unclear. This paper investigates whether a particular aspect of borrowers’ financial literacy—their numerical ability—may have played a role. We measure several aspects of financial literacy and cognitive ability in a survey of subprime mortgage borrowers who took out mortgages in 2006 or 2007 and match these measures to objective data on mortgage characteristics and repayment performance. We find a large and statistically significant negative correlation between numerical ability and various measures of delinquency and default. Foreclosure starts are approximately two-thirds lower in the group with the highest measured level of numerical ability compared with the group with the lowest measured level. The result is robust to controlling for a broad set of sociodemographic variables and not driven by other aspects of cognitive ability or the characteristics of the mortgage contracts. Our results raise the possibility that limitations in certain aspects of financial literacy played an important role in the subprime mortgage crisis.

Read more.

Experian ranks top 20 major U.S. metropolitan areas by average debt per consumer

See List

Want to Live Longer? Choose a Young Spouse

Source: Max Planck Institute for Demographic Research

Related to life expectancy choosing a wife is easy for men – the younger the better. The mortality risk of a husband who is seven to nine years older than his wife is reduced by eleven percent compared to couples where both partners are the same age. Conversely, a man dies earlier when he is younger than his spouse.

Read more.

Thursday, May 13, 2010

Coverage for Young Adults Under the Affordable Care Act

Source: U.S. Department of Health & Human Services

Young Adults and the Affordable Care Act: Protecting Young Adults and Eliminating Burdens on Families and Businesses

The Affordable Care Act allows young adults to stay on their parents’ health care plan until age 26.   Before the President signed this landmark Act into law, many health plans and issuers could and did in fact remove young adults from their parents’ policies because of their age, leaving many college graduates and others with no insurance. 

Read more.

Monday, May 10, 2010

ICI Report on Retirement Funds

Source: Investment Company Institute

The U.S. Retirement Market, 2009

Key Findings

• Total U.S. retirement assets were $16.0 trillion at year-end 2009, up nearly $2.0 trillion, or
14 percent, from year-end 2008. The increase in retirement assets largely was driven by investment
returns. Nearly all asset classes experienced positive total returns in 2009.
• Market performance exerted upward pressure on most retirement plan assets in 2009. Individual
retirement account (IRA) assets rose $651 billion, or 18 percent; and defined contribution (DC) plan
assets rose $635 billion, or 18 percent. Despite net outflows in 2009, state and local pension plan
assets rose $341 billion, or 14 percent, and private-sector defined benefit (DB) plan assets rose
$191 billion, or 10 percent. Total federal government pension assets, which were primarily invested
in nonmarketable government securities, rose 8 percent in 2009.
• Assets earmarked for retirement are a key component of households’ balance sheets. At year-end
2009, retirement assets represented 35 percent of all U.S. households’ financial assets. DC plan
accounts were 9 percent of household financial assets and IRA assets were another 9 percent.
• Employer-sponsored retirement plans play a key role in helping American workers save for
retirement. The bulk (nearly two-thirds) of Americans’ retirement assets were held in employer sponsored
retirement plans at year-end 2009. Furthermore, a significant portion of assets held in
IRAs originated in employer plans and were then transferred (or “rolled over”) into IRAs.
• DC plan and IRA assets invested in mutual funds constituted one-quarter of Americans’ retirement
savings at year-end 2009. More than half of Americans’ retirement savings were held in DC plans
and IRAs at year-end 2009. Mutual funds managed 51 percent of DC plan assets and 46 percent of
IRA assets.

Read more.

SEC Primer on Target Date Funds

Source: Securities and Exchange Commission

Investor Bulletin:  Target Date Retirement Funds

Investing for retirement can be complex.  When deciding where to invest, you may need to make a variety of decisions, including how to balance the risk of losing money with the desire to increase your returns, keeping in mind that inflation may reduce the purchasing power of your savings and you or your spouse or partner may live longer in retirement than you expect.  Recognizing this, a number of companies offer “target date retirement funds,” sometimes referred to as “target date funds” or “lifecycle funds.”

Read more.

Friday, May 7, 2010

Employment Based Health Insurance and the Recession

The Impact of the Recession on Employment-Based Health Coverage

May 2010
EBRI Issue Brief #342
Paperback, 24 pp.
Executive Summary

This Issue Brief examines changes in health coverage among workers during the recession that started in December 2007. Data from the Survey of Income and Program Participation are used to examine health coverage prior to the recession, and as recently as July 2009. Monthly changes are examined for 2007 and May 2008?July 2009, with emphasis on changes that occurred between September 2007 and April

Read more.

KFF Provides Summary of Key Changes to Medicare in 2010 Health Reform Law

Source: Kaiser Family Foundation

This brief provides a detailed look at the improvements in Medicare benefits, changes to payments for providers and Medicare Advantage plans, various demonstration projects and other Medicare provisions in the law.  It includes a timeline of key dates for implementing the Medicare-related provisions in the law.


Tuesday, May 4, 2010

Feeling Guilty About a Mortgage Default?

Source: Arizona Legal Studies Discussion Paper

Beyond Guilt in the Housing Crisis: The Morality of Strategic Default

Responding to those who argue that homeowners who strategically default on their mortgages are immoral and socially irresponsible, this article argues that breaching a mortgage contract is not only morally acceptable, it may be the most responsible course of action when necessary to fulfill more important obligations to one’s family.

Monday, May 3, 2010

IRS on Employer Provided Coverage for Children Under Age 27

Source: Internal Revenue Service

Tax-Free Employer-Provided Health Coverage Now Available for Children under Age 27

IR-2010-53, April 27, 2010
WASHINGTON — As a result of changes made by the recently enacted Affordable Care Act, health coverage provided for an employee's children under 27 years of age is now generally tax-free to the employee, effective March 30, 2010.

The Internal Revenue Service announced today that these changes immediately allow employers with cafeteria plans –– plans that allow employees to choose from a menu of tax-free benefit options and cash or taxable benefits –– to permit employees to begin making pre-tax contributions to pay for this expanded benefit.

IRS Notice 2010-38 explains these changes and provides further guidance to employers, employees, health insurers and other interested taxpayers.

“These changes give employers a unique opportunity to offer a worthwhile benefit to their employees,” IRS Commissioner Doug Shulman said. “We want to make it as easy as possible for employers to quickly implement this change and extend health coverage on a tax-favored basis to older children of their employees.”

This expanded health care tax benefit applies to various workplace and retiree health plans. It also applies to self-employed individuals who qualify for the self-employed health insurance deduction on their federal income tax return.

Employees who have children who will not have reached age 27 by the end of the year are eligible for the new tax benefit from March 30, 2010, forward, if the children are already covered under the employer’s plan or are added to the employer’s plan at any time. For this purpose, a child includes a son, daughter, stepchild, adopted child or eligible foster child. This new age 27 standard replaces the lower age limits that applied under prior tax law, as well as the requirement that a child generally qualify as a dependent for tax purposes.

The notice says that employers with cafeteria plans may permit employees to immediately make pre-tax salary reduction contributions to provide coverage for children under age 27, even if the cafeteria plan has not yet been amended to cover these individuals. Plan sponsors then have until the end of 2010 to amend their cafeteria plan language to incorporate this change.

In addition to changing the tax rules as described above, the Affordable Care Act also requires plans that provide dependent coverage of children to continue to make the coverage available for an adult child until the child turns age 26. The extended coverage must be provided not later than plan years beginning on or after Sept. 23, 2010. The favorable tax treatment described in the notice applies to that extended coverage.

Information on other health care provisions can be found on this website,

Employers Chill Defined Benefit Plans

Source: Bureau of Labor Statistics

“Frozen” Defined-benefit Plans (PDF)

Durng the current economic recession, as employers search for ways to reduce costs, the phrase “frozen retirement plans” is heard with greater frequency. Frozen plans are those that are closed to employees not previously participating in the plan and/or place limits on future benefits for some or all active participants. This issue of Program Perspectives focuses on defined- benefit retirement plans that are frozen.

Twenty percent of private industry workers and 79 percent of State and local government workers participated in a defined-benefit retirement plan in March 2009. Defined benefit plans provide employees with guaranteed retirement benefits that are based on a benefit formula. Of those that participated in defined benefit plans, 19 percent of private industry workers and 10 percent of State and local government workers were in frozen plans.


Mortgage Fraud on Rise

Source: LexisNexis

Mortgage Fraud Continues to Climb According To LexisNexis® Mortgage Asset Research Institute4/26/2010

Incidents of Mortgage Fraud Increase 7 Percent from 2008 to 2009
Florida, New York and California Top List of States with Highest Mortgage Fraud and Misrepresentation Rates

New York, NY – Reported incidents of mortgage fraud and misrepresentation by professionals in the mortgage industry in the U.S. are continuing to climb and increased by 7 percent from 2008 to 2009, according to a new report released today by the Mortgage Asset Research Institute, a LexisNexis® service. While the pace has slowed since the 2007-2008 increase of 26 percent, the continued increase is believed to be attributed to better industry reporting and policing.

Read more.


Saturday, May 1, 2010

COBRA Subsidy Eligibility Period Extended to May 31

Source: Internal Revenue Service

Workers who lose their jobs during April and May may qualify for a 65-percent subsidy on their COBRA health insurance premiums, according to the Internal Revenue Service. The American Recovery and Reinvestment Act established this subsidy to help workers who lost their jobs as a result of the recession maintain their employer sponsored health insurance. The Continuing Extension Act of 2010, enacted April 15, reinstated the COBRA subsidy, which had expired on March 31. As a result, workers who are involuntarily terminated from employment between Sept. 1, 2008 and May 31, 2010, may be eligible for a 65-percent subsidy of their COBRA premiums for a period of up to 15 months. In some cases, workers who had their hours reduced and later lose their jobs may also be eligible for the subsidy.