Mr. Chairman, I want to thank you for holding this hearing on an enormously important subject - financial literacy. It's a subject of great interest to me, and I am grateful for your attention to the many facets of this issue, focusing on the unbanked, underserved communities, older citizens and the predatory lending.
The issue that we will discuss today - credit card usage by college students - is as important as they get. And it's a particularly frightening prospect for me as the father of a soon-to-be college freshman.
By now we've all heard the shocking anecdotes and startling statistics underscoring the lack of financial literacy that's pervasive throughout all age, races and socio-economic segments of our society.
Regrettably, our young people are but another glaring example of that void. According to the Americans for Consumer Education and Competition the vast majority of high school students - 82% of them - failed a fairly standard personal finance quiz.
It's a relatively safe bet that even an even greater number no less about what "APR", "simple and compound interest" or a "revolving line of credit" means.
To be certain, there are numerous benefits derived from placing credit cards in the hands of responsible college students.
They can help defray the financial pressures on students, and parents, who would otherwise have difficulty coming up with the costs of going to college - money to purchase books, paying skyrocketing tuition costs and even that much-needed pizza during a long study session.
But there are pitfalls associated with placing these cards in the hands of those who lack basic knowledge about finances and credit, or the maturity to handle a newfound "source of wealth." According to the GAO, 55% of college students obtain a credit their freshman year. That's an enormously powerful tool in the hands of a 17 or 18 year-old.
One concern of mine is the intense marketing aimed at college-aged students going on at colleges and universities all across America by financial institutions and other credit card issuers.
Today, students find themselves barraged by credit card solicitations via mail, e-mail and campus visits by credit card representatives who offer everything from free T-shirts to Frisbees to water bottles to get students to apply for their cards.
As a result, some schools and some states have sought to restrict credit card solicitations on-campus. In doing so they seek to reverse the growing overall trend of credit card debt facing undergraduate students - where average credit card debt has increased by almost 25% over the past five years.
Left unchecked, this growing debt threatens to severely undermine the home buying, renting and employment futures of an entire generation. That's why it's so important that we carefully examine this issue.
I thank you Mr. Chairman for seeking to do so today, and thank the witnesses for providing us with their testimony. I would be remiss if I didn't commend Senator Dodd for his legislative efforts in seeking to protect students, and their parents, from the accumulation of large credit card debt as well.
Thank you, Mr. Chairman.