April Law Wise

PUBLISHED BY

LAW WISE Coordinators:

APRIL 2021 • ISSUE 5

ethany J. Roberts, Chair, LRE Committee; B Lisa Leroux-Smith, Public Services Director; Nicolas Toledo Shump, Law Wise Editor; & Abbey Gilliland-King, Layout & Graphics

Greetings from the Kansas Bar Association (KBA).

Welcome to the final edition of Law Wise for the 2020-2021 school year.

IN THIS ISSUE Financial Literacy Overview...................................... 1 Financial Literacy in the Classroom...........................2 The Burden of Student Debt.................................... 3 The Importance of Credit and Credit Card Debt................................................................4 Credit and Debt Protection Through Legislation..................................................................5 Lesson Plans............................................................ 6 Terrific Technology for Teachers...............................9 Editor Bio & Contact Info...................................... 10

Date Event April 1 April Fool’s Day April 2 Autism Awareness Day April 4 Easter April 7 World Health Day April 22 Earth Day

Financial Literacy Overview April is Financial Literacy Month, and this is a topic which is perhaps even more important now than ever as we all work to find our way through this pandemic. According to 2019 survey data, fewer than 40% of college students create a budget to handle their personal finances. This issue will highlight organizations like Credit Abuse Resistance Education (CARE) that offers resources to college and universities. The cost of a college education has skyrocketed within the last few decades resulting in students taking out loans to finance their education. Currently, Americans owe $1.71 trillion dollars in student loan debt. This concern will be covered in this issue as will credit card debt. According to the Federal Reserve, the typical American family owes over $6000 in credit card debt.

The United States government has offered protection for consumers with organizations like the Federal Deposit Insurance Corporation (FDIC) and Federal Savings and Loan Insurance Corporation (FSLIC) among others. An overview of these legislative initiatives and relevant court cases will conclude this issue devoted to the importance of fiscal literacy.

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Financial Literacy in the Classroom In his courtroom, Judge Ninfo saw many instances where financial mistakes ruined people’s lives. He started going April is Financial Literacy Awareness month. Per to schools and sharing information in the hopes of helping the Organization for Economic Co-operation and students avoid these financial disasters. The response he Development (OECD)’s Program for International received was positive as the students enjoyed hearing from Student Assessment (PISA) 2012, “Financial literacy is an expert. Other judges and legal experts became involved knowledge and understanding of financial concepts and and now CARE presentations are available nationwide. risks, as well as the skills and attitudes to apply such knowledge and understanding in order to make effective What makes CARE special is the presenters. When decisions across a range of financial contexts, to improve a bankruptcy judge, court trustee, attorney or other the financial well-being of individuals and society, and to financial expert meets with a class, they bring real life enable participation in economic life.” experiences that make their presentations interesting and relatable. The presenters are willing to meet with a class Including financial literacy instruction in the classroom in-person or online and they can cover a wide variety is important but the United States is falling short in this of financial topics. Some examples are: budgets, credit regard. Champlain College’s Center for Financial Literacy cards, student loans, credit scores, and identity theft. published a report that gave a C rating or lower to 35 Presentations include handouts, interactive activities states. Furthermore, a large scale survey published in and Q & A sessions. Additionally, presenters are open to 2019 reported that only 38% of college students claimed making multiple visits to a classroom. to have ever used a budget to manage their finances.

The reasons behind our lack of financial literacy CARE strives to make including financial literacy as in schools are probably multifaceted. Teachers are seamless as possible for teachers to incorporate into a overwhelmed with the amount of material they need class. Presentations can be customized to the needs of any to cover already in the classroom and they may not feel group. CARE presenters are careful about reaching out comfortable teaching financial literacy. In a 2016 survey, to teachers beforehand to collaborate and share materials 69% of teachers reported feeling either only moderately so that each class gets what it needs. comfortable or not comfortable at all in teaching financial literacy. This is where Credit Abuse Resistance Education Requesting a CARE presentation is simple. On the (CARE) can help.

CARE website, https://care4yourfuture.org/, click on the “Educators” tab to find the form. CARE will then reach CARE is a national, nonprofit organization that works out to the chapter in your local area and facilitate getting with schools to provide free financial literacy presentations you matched up with a presenter. and curriculum. Its goal is to teach people how to use credit responsibly so they do not get into debt trouble.

Carolyn J. Craycraft Clark is an attorney at In 2002, U.S. Bankruptcy Court Judge John C. Ninfo Zimmerman & Zimmerman, P.A. and a CARE II in the Western District of New York founded CARE. volunteer.

By Carolyn J. Clark

Judge Ninfo, CARE founder www.ksbar.org/lawwise

APRIL 2021 | LAW WISE 3

The Burden of Student Loan Debt According to Experian, as of 2019, student loan debt has reached a record high of $1.57 trillion dollars with nearly 45 million Americans having student loan debt. Student loans in forbearance and referral status has doubled in the past year reaching 72% of all accounts. Since 2019, the overall balance of student loans has increased by 12%. Student Loan Hero noted that the class of 2019 graduated with just under $30,000 in student loan debt while their parents assumed an average of $37,000 in debt through parent loan programs. The average balance for student loans in 2020 is just slightly under $39,000 an increase of 10% since 2019.

The impact of student loan debt extends beyond the obligation to repay these loans. Experian notes the average FICO score for students with student loan obligations is 20 points lower than those without student loans. In 2020, Kansas students had an average of $34,500 in debt.

Though the highlight is often on student debt, many parents have also incurred substantial debt in their efforts to help pay for their children’s education. A study on the Parent PLUS loan program noted that over 1 million parents had secured these loans with an average debt of $16,000, though some parents have loan debt of more than $60,000.

A question that must be asked is whether or not a college degree is worth the assumption of this debt. A 2016 Presidential report titled “Investing in Higher Education” showed that a student with an associate degree will earn $360,000 more than someone with a high school diploma. The disparity grows to $1 million for those earning a bachelor’s degree. The federal student loan programs limit borrowing by undergraduates to $31,000 for dependent students and $57,500 for those who are non-dependent students. Only 6% of students have more than $100,000 in debt and this is often the result of a student attending graduate school. These numbers might be different for students pursuing advanced degrees in law and medicine.

The Upjohn Institute argues that tuition increases from 1990 to 2012 accounts for a 60% increase in student loans for those pursuing a bachelor’s degree. Federal legislation over the past

forty years have changed the borrowing patterns of student and their parents. In 1980, Congress allowed parents to take out education loans. By 1992, Congress eliminated income limits for borrowers, raised the debt ceiling for students, and eliminated the ceiling for parents. Finally in 2006, Congress eliminated limits on borrowing for graduate students. By 2014, just under 9% of parents owed more than $100,000. In 2000, only 1% of parents carried that debt load.

A growth in students borrowing loans for attendance at for-profit schools skyrocketed to over 900,000 borrowers.

Recent developments by the Biden administration to forgive approximately $1 billion primarily comes from students who attended these institutions. The Brookings Institute noted that 33% of students who attended four-year for-profit institutions defaulted within five years while the default rate was 27% for community college students and 14% for students who attended four-year colleges or universities.

The costs beyond the actual student loan debt are significant as well. Taxpayer obligation for these defaulted loans was approximately $307 billion in 2019, a number calculated prior to the program changes to student loans as a result of Covid-19. Some research by the Federal Reserve estimates that the 20% decline in homeownership has some correlation to the increased student loan debt.

The United States faces an unprecedented challenge socially and economically as a result of the Covid-19 pandemic.

Colleges and their students are making adjustments as well.

At least initially, many colleges and universities will face major budget deficits which could impact the availability of scholarships and other programs to help students to pay for their education. Tuition, especially at state universities, will likely rise as state governments struggle to balance their own budgets. Current and future students will need to be judicious in their use of student loans. Understanding budgeting and other essentials of financial literacy will help them on their journey.

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4 LAW WISE | APRIL 2021

The Importance of Credit and Credit Card Debt It is important to establish good credit regardless if you plan to use credit cards in your future. Employers often check your credit before offering you work. If you rent an apartment or want to secure a mortgage to buy a home, credit is an important factor in these processes. In fact, credit might determine the interest rate attached to your mortgage. Smart budgeting can help keep you from abusing credit and accruing bad debt.

For many individuals, going off to college or moving out of your family home is when they first apply for and often receive a credit card. In the 1990s and early 2000s, a college student might encounter a gauntlet of credit card providers offering cups, t-shirts, pizza, and other incentives to encourage you to sign up for credit cards. Most students received approval and found themselves with a wallet full of credit cards and a wardrobe of t-shirts bearing the logos of the various credit cards they now possessed.

Unfortunately, the illusion of limitless cash led to overspending by students who had not learned how to budget and likely had not read the fine print regarding interest rates and charges for late payments. According to Sallie Mae, in 2019 the average credit card debt for college students was nearly $1200. This showed an increase of 31% since 2016. The report further noted that 57% of students, 83% of college graduates, and 61% of former college students without a degree owned at least one credit card. However, a typical college student in 2019 held five credit cards. Over 20% of college students admitted

to making at least one late payment and about 60% of students are capable of paying off their full balance every month. As of January of 2020, the average credit card interest rate is 17.3%, 14.1% for low-interest cards, and 26.1% for those who missed a payment. This discrepancy for college students who struggle to manage their credit card debt is costly. The amount of your credit owed and your payment history account for 65% of your credit score.

The main legislation designed to help college students with credit and credit card debt went into effect in 2009. The Credit Card Accountability, Responsibility, and Disclosure (CARD) Act changed the process and offered additional protections for students. No longer could companies entice students on campus or at school events. Gone were the days free pizza and t-shirts. This led to a decrease in the number of college credit card accounts from 2009 to 2015, but this changed in 2016 as that number has continued to rise.

As the United States continues to work through the economic effects of the pandemic, many college students experienced diminished income as jobs in the service industry declined.

The lure of credit cards might help these students during these difficult times, but students, and all of us who use credit, must be smart and vigilant. Obtaining financial literacy is one tool that could significantly help in this process.

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APRIL 2021 | LAW WISE 5

Credit and Debt Protection Through Legislation These various federal laws offered a variety of protections in numerous areas for consumers regarding banking, credit, debt, and other economic issues.

Coronavirus Aid, Relief, and Economic Security (CARES) Act (2020) - As part of this comprehensive legislation, the interest rate for federal student loans was lowered to 0%. Additionally, payments were paused through September of 2021.

Credit Card Accountability, Responsibility, and Disclosure (CARD) Act (2009) - This legislation offered new protections and changed practices regarding how credit card companies could solicit students. Among some of the main provisions of this legislation: • Companies could not offer gifts or other enticements within 1000 feet of college campuses and they could not solicit at school-sponsored events.

• Credit card companies could not offer pre-screened cards to students under the age of 21 without the student’s permission.

• Students under the age of 21 must have either an independent source of income or must have a co-signer.

Dodd-Frank Wall Street Reform and Consumer Protection Act (2010) - This act passed in the aftermath of the 2008 financial crisis and signed into law by President Obama established some new government agencies to regulate and monitor financial and insurance companies. The Federal Insurance Office and the Consumer Financial Protection Bureau (CFPB) were among the new agencies established. The Volker Rule restricted trading and investing by major banks. The act bolstered the existing whistleblower program of the Sarbanes-Oxey Act. In 2018, President Trump signed new legislation that rolled back some of the key provisions.

Equal Credit Opportunity Act (1974) - This law signed by President Gerald Ford prohibited creditors from discriminating on the basis of race, color, religion, national origin, sex, marital status, or age.

Fair Credit Reporting Act (FCRA) (1970) - This act is part of the Consumer Credit Protection Act and offers protection for the information collected by credit bureaus and other institutions that collect this type of information.

Fair Debt Collection Practices Act (1977) - This legislation established protections against abusive debt collection practices among other measures.

Federal Deposit Insurance Corporation (1933) - The Banking Act of 1933 also known as the Glass-Steagall Act established this independent government corporation which insured bank deposits against banking failures that had occurred during the Great Depression.

Federal Savings and Loan Insurance Corporation (1934) - Established by the National Housing Act of 1934, it served a similar protection for savings and loans. In 1989, the protection was transferred to the FDIC. Federal Trade Commission Act (1914) - This legislation signed into law by President Woodrow Wilson outlawed unfair competition and deceptive practices in commerce. This was during the Progressive Era in American history. The act established the Federal Trade Commission to regulate competition in the marketplace.

Truth in Lending Act (TILA) (1968) - This law protects consumers against unfair and inaccurate credit billing and credit card practices. Lenders must provide loan cost information so consumers can compare various loans.

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Making Money Lesson Plan From InCharge.org Grades 9-12 Overview: Building your career is one of the surest ways to increase income and make money. In this lesson, students will be encouraged to consider various topics related to career planning and the financial aspects of employment. “How does a person apply for a job?” This is a question asked by many students.

• First, students are informed of sources for identifying available employment positions.

• Next, various aspects of interviewing are discussed, as well as information on preparing for a job interview along with tips for successful interviewing.

• Then, financial aspects of employment are considered, including the “hidden costs” of working and employee benefits.

• Finally, for students who have not worked in the past, information is offered about payroll taxes and other deductions from a person’s income.

Lesson Duration: Two class sessions Goals: Gain an understanding of career planning and the processes of employment, tips on starting a new career and provide practice reading and interpreting pay stubs.

Learning Objectives: • Know the phases of the career-planning process • Identify and apply for employment • Understand the interview process • Understand some of the hidden costs of a job • Understand some of the benefits companies often offer employees • Interpret a pay stub Lesson Materials: In the first class session, have students access the pdf slides found here: (https://www.incharge.org/wpcontent/uploads/2015/07/Teachers-Slide-Presentation-Lesson-Two.pdf). Students should look over slides 2A-2G prior to completing the lesson activities.

Lesson Activities: In the second class session, students will complete the following activities found here (https://www. incharge.org/wp-content/uploads/2015/07/Student-Guide-Lesson-Two.pdf): • The career planning process • Preparing for a job interview • Reviewing common interview questions • Adding up the benefits • Reading a pay stub • Examine a sample pay stub with deductions Class Discussion: For the final class session, organize a class discussion and allow students to share what they have learned and ask questions or express concerns they may have about employment and career path.

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APRIL 2021 | LAW WISE 7

Using Credit Wisely From practicalmoneyskills.com For Grades 9-12 Overview: As teens prepare to enter the financial world, there are many elements for them to consider when it comes to credit.

Whether they are off to college in a few months or gearing up to purchase a first car, they will find that credit plays an important part in many life activities—if used wisely. But used unwisely, credit can lead to unmanageable debt. In this lesson, students will discuss the concept of credit and how it can be used responsibly, learn different components of credit cards, review elements of a credit score and research consumer credit laws.

Lesson Duration: 70 minutes Lesson Materials: • Notebooks • Computer or tablet • Internet access • Projector • Digital images of “big ticket” items (cars, TVs, etc.)

• Student activity sheets (https://www.practicalmoneyskills.com/assets/pdfs/lessons/lev9-12/SA_Lesson14.pdf) Learning Objectives: • Understand the elements of credit • Evaluate how use of credit influences credit scores • Explore major consumer laws Lesson Activities: Lesson One: What is Credit? (20 minutes) • Display images of the big-ticket items you have collected. Ask students to identify which items they find attractive and what would be required to purchase the item.

• Begin a discussion regarding various methods of payment for these type of items. Explain the difference between a debit card and a credit card. Ensure students realize what “credit” means and how they are paying for the item and interest.

• Poll the class to determine if the students have ever used a debit or credit card.

• Pass out the Student Activity 1-It’s More Than a Piece of Plastic. Put students in pairs and have them complete the worksheet. Allow 10 minutes to complete.

• Have students share their findings. You might ask them to consider the following questions:

1. The importance of high and low credit limits

2. Making only minimum payments

3. The significance of an annual fee • Give students 10 minutes to investigate the difference between debit and credit cards by using these websites.

1. Practicalmoneyskills.com/HS55

2. Practicalmoneyskills.com/HS56 • Ask the students to open their notebooks and create the following chart with Credit Cards and Debit Cards as the headings. From the information on the websites listed above have the students consider the following:

1. Similarities

2. Differences

3. Advantages

4. Disadvantages • Ask for student volunteers to share their findings and begin a conversation on the pros and cons of debit and credit cards.

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8 LAW WISE | APRIL 2021

Lesson Two: The Importance of a Good Credit Record (20 minutes) • Begin a short discussion regarding the importance of good credit. Have students consider that good credit results in lower interest rates for larger purchases and for renting an apartment or buying a home. Additionally, buying a car or taking out student loans are impacted by credit scores too.

• Emphasize the importance of “creditworthiness” and why this is so important to establish.

Lesson Three: Consumer Credit Laws (20 minutes) • Inform students their credit records are protected from discrimination based on religion, marital status, or race and is illegal.

• Explain to the students how they can access a free credit report each year online at sites like AnnualCreditReport.com.

Tell them they should monitor their credit and how they can challenge their report if it is not accurate.

• Pass out Student Activity 2 Consumer Credit Laws. Students can review some of these laws on the FTC website from this link: (https://www.consumer.ftc.gov/articles/0347-your-equal-credit-opportunity-rights). Allow students 10 minutes to complete the worksheet.

• Ask for volunteers and initiate a discussion on the importance of consumer credit laws and the protections they provide.

Student Reflection (5 minutes) • Ask students to use their notebooks to consider the costs and benefits of credit.

• Ask students to use their notebooks to consider how they might be able to use credit as part of their financial life.

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APRIL 2021 | LAW WISE 9

TERRIFIC TECHNOLOGY FOR TEACHERS

360 Degrees of Financial Literacy - https://www.360financialliteracy.org/ • A free program created by the American Institute of CPAs that offers resources to help individuals to learn more about financial literacy and related topics.

Credit Abuse Resistance Education - https://care4yourfuture.org/ • This is the home of CARE, an organization founded by now-retired U.S. Bankruptcy Court Judge John C. Ninfo II. CARE works to educate high school and college students about the responsible use of credit and how to avoid credit card abuse.

Credit Abuse Resistance Education Curriculum - https://care4yourfuture.org/curriculum • For schools and classes interested in having a CARE instructor come to your classroom to make a 45-minute presentation that also includes extension activities and additional resources.

Financial Literacy - https://www.annuity.org/financial-literacy/ • Excellent information regarding financial literacy from annuity.org. Some of the topics covered beyond the basics of financial literacy are debt, credit scores, and student loans.

Financial Literacy - https://www.investopedia.com/terms/f/financial-literacy.asp • A guide to financial literacy from Investopedia that provides basic definitions of financial literacy, finance, personal finance, and the importance of financial literacy.

Financial Literacy 101 - https://www.financialliteracy101.org/financial-literacy/ • This site contains a wealth of information regarding financial literacy including additional information on topics like students and credit cards. They also offer programs for colleges and universities.

Financial Literacy Month: 30 Steps to Financial Wellness - https://www.moneymanagement.org/creditcounseling/resources/financial-literacy-month • To celebrate financial literacy month in April, Money Management International is offering a challenge to take a pledge to complete 30 steps during the month. However, you can do this challenge at any time.

The Five Key Components of Financial Literacy - https://www.fastweb.com/student-life/articles/the-5-keycomponents-of-financial-literacy • Geared towards high school and college students, this information from fastweb.com covers topics like: budgeting; interest rates; savings; credit-debt cycle traps; and identity theft.

Personal Finance Education - https://www.incharge.org/financial-literacy/ • Free financial education resources offered by InCharge Debt Solutions including a section for teachers.

What Do You Need to Know About Financial Literacy? - https://www.daveramsey.com/blog/what-isfinancial-literacy • An informative overview of important topics in financial literacy from noted financial and debt expert Dave Ramsey.

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10 LAW WISE | APRIL 2021 iCivics Resources for Getting Involved & Taking Action

www.icivics.org

This site provides teachers with free resources that improve students’ civic knowledge, civic attitudes, and core literacy skills.

Fun Learning Opportunities

provides wonderful tools for educators and students. Take advantage of this great resource!

The KBA also has resources for teachers. Visit: https://www.ksbar.org/page/educator_resources.

About the Law Wise Editor: Nicolas Toledo Shump Nic teaches courses in American Electoral Politics, Design Thinking and Creativity, Film Studies, AP Comparative Government and Politics, AP European History, AP Psychology, AP US Government and Politics, AP US History, and AP World History for Constellation Learning. He also teaches English 110: Introduction to Academic Writing at the University of Missouri-Kansas City (UMKC) where he is a MFA student in Creative Nonfiction. He is a former columnist for the Topeka Capital-Journal and other Gannett Kansas publications. He has served since 2012 as a Discussion Leader for the Talk About Literature in Kansas (TALK) program for Humanities Kansas.

Is Law Wise Helpful to You? We are always open to receiving comments, ideas and suggestions.

Please reply to llerouxsmith@ksbar.org.

Please let us know:

• Topics you would like to explore; • Projects and lessons you have developed that you would like us to feature; • Questions you would like to ask an attorney or judge.

We look forward to hearing from you.

He can be reached at nicshump@gmail.com

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The Kansas Bar Foundation, with Interest on Lawyers’ Trust Accounts (IOLTA) funding, provides support for this publication. Law Wise provides general information about law-related matters of interest to teachers, students, and the public in Kansas, but does not provide any legal advice, so readers should consult their own lawyers for legal advice. For further information about any projects or articles, contact Lisa Leroux-Smith, public services director, llerouxsmith@ksbar.org or 785-234-5696. Law Wise is published by the Kansas Bar Association, 1200 SW Harrison St., Topeka, KS 66612-1806, during the school year.

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