Monthly Archives: August 2010

Federal Credit Card Law Phased-In

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The last parts of the 2009 federal legislation that overhauled the credit card history will be phased in this year.

Over the last year, as a result of the legislation, credit card companies are banned from raising interest rates on existing balances and prohibiting issuers from raising rates when customers miss payments on an unrelated account.

This year other portions of the bill, specifically relevant to college students will be phased-in. These include banning credit card issuers from providing credit cards to people under age 21 unless another adult co-signs for it or the student can show an independent source of income.

In addition, credit card companies are prohibited from offering free incentives in exchange for signing up for a card on campus or at institution events. Colleges are also required to make public any partnerships they have with card issuers.

Finally, credit card issuers must submit any contracts they have with collegiate groups to the Federal Reserve. The Federal Reserve will compile a report with this information, detailing the nature of these relationships.

Comments Requested on Financial Literacy Competencies

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The Financial Literacy and Education Commission is requesting comments on a proposed set of financial education core competencies.

As a part of the Fair and Accurate Credit Transactions Act of 2003, the Commission is required to review the national strategy to promote basic financial literacy and education. As a part of this review the Commission determined that there is a need to develop core competencies for consumers and financial education providers.

The development of core competencies is a fundamental step in establishing a clear understanding about what individuals should know and the basic concepts program providers should cover. In addition the competencies should establish a baseline of knowledge.

The intention of the competencies is to define what consumers should know and be able to do to successfully understand and make informed decisions about their personal finances. To this end, the Commission has identified five core concept areas: (1) earning, (2) spending, (3) saving, (4) borrowing, and (5) protecting against risk as well as specific core competencies for each area.

The deadline for comments regarding whether the list of Core Competencies is complete and whether there are portions that should be deleted, revised, or expanded is September 12.  The request for comments is one of several steps in the validation phase of the development of the competencies.

Jobs Bill Saves Thousands of Washington Teacher Positions

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Last week President Obama signed into law the Jobs Bill. The bill provides $26 billion to states to support education jobs and fund Medicaid budgets.

The U.S. Senate approved the bill on August 5, followed by the U.S. House of Representatives on August 10.

Washington is expected to receive $530 million. The state will receive $320 million for Medicaid and $208 million to pay salaries for 3,000 teachers who were in line to lose their jobs.

According to the U.S. Deparment of Education over the last two years the federal government has been able to support 300,000 education jobs through stimulus funding under the American Recovery and Reinvestment Act (ARRA).

To date, seven states have drawn down 100% of previously allocated funding under the State Fiscal Stabilizatioon Fund, while 18 states have drawn down 80% or more. According to the Center on Education Policy 75% of school districts that received stimulus funds expect to cut teaching positions in the upcoming school year.

Guidance and applications for the federal dollars have been sent to Governors.

Obama Delivers Major Higher Education Speech

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Last week President Obama delivered a major speech on higher education at the University of Texas on Austin.

The speech restates the President’s commitment to increasing the attainment of postsecondary education credentials by more Americans and highlights the steps the Administration has taken to move in this direction.

As stated by the President, “I want you to know we have been slipping…In a single generation, we’ve fallen from 1st place to 12th place in college graduation rates for young adults….  Now, that’s unacceptable, but it’s not irreversible.  We can retake the lead.  If we’re serious about making sure America’s workers — and America itself — succeeds in the 21st century, the single most important step we can take is make sure that every one of our young people has the best education that the world has to offer.” 

“Now,” he continued, “when I talk about education, people say, well, you know what, right now we’re going through this tough time….  So, Mr. President, you should only focus on jobs, on economic issues.  And what I’ve tried to explain to people…is that education is an economic issue.  Education is the economic issue of our time.  It is an economic issue when the unemployment rate for folks who’ve never gone to college is almost double what it is for folks who have gone to college.  It is an economic issue when almost eight in 10 new jobs will require workforce training or higher education by the end of this decade.  And it is an economic issue when we know, beyond shadow of a doubt, that countries that out-educate us today will out-compete us tomorrow.”

To support the comments expressed by the President in Austin the Obama Administration has launched a comprehensive plan to address college affordability, access and success, to help regain the nation’s standing as a world leader in higher education by the end of the next decade.

Among the steps in the Admininstration’s plan are investing in college access and completion, strengthening and stabilizing the Pell Grant, strengthening minority serving institutions, and simplifying the federal applicatin for financial aid.

New Financial Reform Law Affects Higher Education

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At the end of July the Wall Street Reform and Consumer Protection Act was signed into law. The law impacts higher education in many ways.

The law creates a new Consumer Financial Protection Bureau (CFPB) that specifically has jurisdiction over any person or entity that offers “private education loans”. The CFPB will be a part of the Federal Reserve System  and has the power to issue and enforce regulations to protect consumers from abuses. The jurisdiction of the CFPB also covers entities that offer “private education loans”.

In addition, the law creates a Private Education Loan Ombudsman in the CFPB to resolve private education loan borrowers’ complaints. The Ombudsman is authorized to collaborate with the U.S. Department of Education, institutions, lenders, loan servicers, and guaranty agencies to resolve complaints.

The law also directs the Federal Reserve to  issue rules by April 21, 2011 to ensure that debit card interchange fees charged to debit-card-accepting merchants are reasonable and proportional to the cost of processing those transactions. This is a big benefit to university and college bookstores.

Finally, the law prohibits card networks from keeping any merchant, including universities, from setting minimum transaction amounts for credit card payments. However, the minimum transaction cannot be greater than $10. The card network also cannot prohibit any institution of higher education or federal agency from setting maximum transaction amounts or prevent any merchants from offering discounts for certain forms of payment.

Financial Aid May Get Bump from Lottery

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A  new marketing campaign promoting Washington’s Lottery as a source of funding for higher education financial aid programs is expected in the coming months.

At the direction of the 2010 Legislature, Washington’s Lottery can now be used to partly fund the State Need Grant, State Work Study, Washington Scholars, the Washington Award for Vocational Excellence (WAVE), and other programs.

The HECB is working with Washington’s Lottery to communicate this news statewide. Senate Bill 6409, prime-sponsored by Senator Jim Kastama, established a Lottery-funded Opportunity Pathways account, from which funds can be directed to student financial aid and early learning programs.

In the current Fiscal Year 2011, about 65 percent ($73.5 million) of Lottery dollars in the Opportunity Pathways account will be used to help fund the State Need Grant program, and 35 percent ($40 million) will support early learning programs.

Other funding for these programs will come from the General Fund. Lottery proceeds that previously contributed to K-12 construction projects will continue to be funded at $102 million under the General Fund.

General Fund appropriations for financial aid were reduced significantly in the 2011 supplemental budget. It is hoped that greater awareness about the Lottery’s contribution to higher education scholarships and financial aid will spur increased public support, reducing the need for General Fund appropriations.

Evergreen Receives Energy Grant

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The Evergreen State college was one of 29 public schools and colleges that received an energy grant this week.

The grants from the Washington Department of Commerce will assist schools and colleges with paying for lighting and heating upgrades, new electrical and hot water systems, and air conditioning improvements.

Evergreen received $415,742 to provide a heat recovery system, control system renovation, and lighting.

Governor Announces Next Steps in the Budget Process

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During a press conference this afternoon, Governor Gregoire announced the steps she will take to address a potential shortfall in the current state budget and direct agencies to prepare for an additional shortfall in 2011-13.

Despite the receipt of federal funds for Medicaid and teachers, agency and department savings, and reductions in state spending, dollars for the state budget remain difficult.

Over the last two months revenue collections have declined by $125 million below forecasted levels. Though the state has a $72 million ending fund balance for the 2009-11 biennium, after taking into consideration revenue declines, the potential for additional budget shortfalls that would eliminate the remaining dollars in the ending fund balance remain possible if future revenue reports continue to show a decline.

Beyond the current biennium, the state is also estimated to face a $3 billion deficit over the next two year budget (2011-13).

Given this context, the Governor announced three actions she will direct state agencies to undertake to prepare for the upcoming two-year budget and potential revenue shortfalls in the short-term.

  • Prepare reductions of 4-7% for the possibility of across-the-board cuts starting October 1 if the September forecast or revenue receipts are lower than expected.
  • Prepare budget reductins for a supplemental budget for the last six months of the current biennium equal to $500 million statewide to be passed in January.
  • Draft 2011-13 budgets to prepare for the expected $3 billion shortfall which will require a 10% reduction in the expected general fund budget.

State Revenue Declines

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State revenues fell again for the second month in a row.

The latest revenue collections released earlier this week showed revenue collections were $124.5 million less than was predicted in June.

Additional details regarding revenue will emerge over the next month. In September the Economic and Revenue F’orecast Council is expected to release an economic report (Sept. 3), a follow-up on tax collections (Sept. 10), and the quarterly revenue forecast (Sept. 16).