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- Trading Practices and Errors When SEC-registered investment advisors conduct annual audits of firm policies and procedures, they should pay close attention to trading practices. Though usually not required to, state-registered advisors should look at their trading practices and revise policies that do not fully protect clients.
- Client Communication and Miscommunication RIA policies and procedures must specify what type of communications should be retained. The safest course of action is for RIAs to retain all communicationsto clients, from clients, and about client accounts. To comply with fiduciary obligations, communications must be thorough and not mislead.
With student loan debt hitting $1.2 trillion, the Senate plans to take up next week a bill introduced by Sen. Elizabeth Warren, D-Mass., the Bank on Students Emergency Loan Refinancing Act (S.2292), which would allow students to refinance their loans.
At a Wednesday hearing held by the Senate Budget Committee, titled “The Impact of Student Loan Debt on Borrowers and the Economy,” Sen. Patty Murray, D-Wash., chairwoman of the committee, said that today, the average college graduate faces paying back “around $30,000 in student loans,” and “a record number of young households owe student debt.”
That debt, she said, “can have lasting consequences for borrowers and weaken their chances of getting ahead,” including getting a mortgage and saving for retirement. Murray cited a recent study finding that college graduates without student debt had accumulated seven times more wealth than those who were paying back school loans.
But taking out student loans, Murray said, has become “a college prerequisite,” as the cost of college has skyrocketed.
Murray said that Sen. Warren's student loan refinancing bill, which she co-sponsored, would allow borrowers to refinance their federal student debt.
The Congressional Research Service, she continued, "estimates that this [refinancing] bill would let borrowers save $4,000 on average."
Sen. Ron Johnson, R-Wis., noted the sizable increase in the cost of a college education over the years. He said that in 1963 a public college education, including room, board and tuition, was $929 per year; in 1988, that amount jumped to $4,678; in 2012, that figure stood at $17,474. Costs have risen at “two and a half times the rate of inflation,” he said. “Why?”
Murray also said there was “mounting evidence” that student debt is also holding back the economy.
“Historically, young Americans have been a source of economic activity, as they set up households and as they start their careers. But today, many are finding it difficult to save up for a down payment on a home. And the high monthly bills to pay back student loans can disqualify many people from getting a mortgage,” she said.
“When first-time homebuyers aren’t able to get mortgages, it can adversely affect the housing industry as a whole.”
Rohit Chopra, student loan ombudsman for the Consumer Financial Protection Bureau, told senators during the hearing that recent data has shown that “three-quarters of the overall shortfall in household formation can be attributed to reductions among younger adults ages 18 to 34, the age group disproportionately impacted by student debt.”
In 2011, he said, 2 million more Americans in this age group lived with their parents compared with 2007.
Chopra pointed to a recent survey by the National Association of Realtors, which found that 49% of Americans cited student loan debt as a “huge obstacle” to homeownership.
Student debt, Murray added, “can also stifle entrepreneurship.”
Said Wyden: “We have to help those students that are underwater; I’m open to a variety of solutions,” including refinancing their loans.
Brittany Jones, a recent college graduate and the former president of the Student Virginia Education Association, told the senators that upon graduation in 2011, “the joy” of completing the first portion of her teacher preparation program “was overshadowed by the truth that I had borrowed well over $70,000 in student loans from various sources — federal subsidized, unsubsidized, Perkins and personal loans.”
Student loan debt, Jones said, “has been the driving force of my decisions for the last eight years of my life, and according to my current repayment plan, it is projected to be for the next 25 years of my life, well into the years for which I should be planning a retirement. It should not be that way.”
Said Jones: “’Degrees not debt’ should be our collective goal.” She urged the senators to increase student aid, “especially for those who need the most financial help,” and to “make student loans more affordable, including by allowing refinancing of those loans as legislation from Senator Warren would do.”
Wyden noted the bill that he introduced last May with Sens. Mark Warner, D-Va., and Marco Rubio, R-Fla., “The Student Right to Know Before You Go Act,” (S.915), which would ensure that a wide range of accurate and easy-to-understand data would be readily available online for prospective students and their families to give them a more complete picture of the value of their education.
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