Financial Literacy for Financial Aid Act

Summary: Financial Literacy for Financial Aid Act This bill amends title IV (Student Assistance) of the Higher Education Act of 1965 to direct the Department of Education to maintain a consumer-tested online counseling tool that provides required entrance counseling to a student who is a first-time federal student loan borrower. 

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Financial Literacy for Financial Aid 
Act''.

SEC. 2. ONLINE COUNSELING TOOLS.

    (a) Option for Institutions of Higher Education.--Section 
485(l)(1)(A)(ii) of the Higher Education Act of 1965 (20 U.S.C. 
1092(l)(1)(A)(ii)) is amended--
            (1) in subclause (II), by striking ``or'' at the end;
            (2) in subclause (III), by striking the period at the end 
        and inserting ``; or''; and
            (3) by adding at the end the following:
                                    ``(IV) through the use of the 
                                online counseling tool described in 
                                subsection (n).''.
    (b) Requirements for Secretary of Education.--Section 485 of the 
Higher Education Act of 1965 (20 U.S.C. 1092) is further amended by 
adding at the end the following:
    ``(n) Online Counseling Tools.--
            ``(1) In general.--Beginning not later than 1 year after 
        the date of the enactment of the Financial Literacy for 
        Financial Aid Act, the Secretary shall maintain an online 
        counseling tool that--
                    ``(A) provides the entrance counseling required 
                under subsection (l); and
                    ``(B) meets the applicable requirements of this 
                subsection.
            ``(2) Requirements of tools.--In maintaining the online 
        counseling tool described in paragraph (1), the Secretary shall 
        ensure that the tool is--
                    ``(A) consumer tested, in consultation with other 
                relevant Federal agencies, to ensure that the tool is 
                effective in helping individuals understand the 
                information described in subsection (l)(2);
                    ``(B) interactive and tests the borrower's 
                understanding of the information described in 
                subsection (l)(2);
                    ``(C) understandable to borrowers of loans made 
                under part D;
                    ``(D) effective in providing instruction in general 
                financial literacy in accordance with paragraph (3) of 
                this subsection; and
                    ``(E) freely available to all eligible 
                institutions.
            ``(3) General principles of financial literacy.--The 
        Secretary shall ensure that the online counseling tool provides 
        instruction in general principles of financial literacy, 
        including the following:
                    ``(A) Personal income.--An explanation of--
                            ``(i) how to identify various types of 
                        income and expenses;
                            ``(ii) gross and net pay and how to read a 
                        paycheck stub; and
                            ``(iii) how to craft financial goals.
                    ``(B) Taxes.--An explanation of--
                            ``(i) the history of taxes;
                            ``(ii) the purpose and uses of taxes; and
                            ``(iii) how to differentiate between types 
                        of taxes.
                    ``(C) Retirement.--An explanation of--
                            ``(i) the importance of planning for 
                        retirement;
                            ``(ii) retirement strategies to achieve 
                        financial goals;
                            ``(iii) how to differentiate among the 
                        types of investment vehicles for retirement; 
                        and
                            ``(iv) how to assess overall financial 
                        situation in determining retirement needs.
                    ``(D) Spending plans and banking resources.--An 
                explanation of--
                            ``(i) the benefits of transaction and 
                        savings accounts;
                            ``(ii) how compound interest helps saved 
                        money grow; and
                            ``(iii) how to define and create a spending 
                        plan.
                    ``(E) Credit cards.--An explanation of--
                            ``(i) how to define and calculate the cost 
                        of borrowing;
                            ``(ii) the difference between good debt and 
                        bad debt;
                            ``(iii) credit cards and how to evaluate 
                        credit card offers;
                            ``(iv) consumer credit rights; and
                            ``(v) credit scores.
                    ``(F) Financial recovery and giving back.--An 
                explanation of--
                            ``(i) how to assess financial health;
                            ``(ii) how to budget;
                            ``(iii) how to find ways to reduce expenses 
                        or increase income;
                            ``(iv) the difference between credit repair 
                        and credit consolidation;
                            ``(v) the importance of charitable giving; 
                        and
                            ``(vi) how to define future financial 
                        goals.
            ``(4) Record of counseling completion.--The Secretary shall 
        use the online counseling tool described in paragraph (1) to 
        keep a record of which individuals have received counseling 
        using the tool, and notify the applicable institutions of the 
        individual's completion of such counseling.''.

SEC. 3. REPORT.

    Not later than 2 years after the date of the enactment of this Act, 
and not less than once every 3 years thereafter, the Secretary shall 
submit to the Committee on Education and the Workforce of the House of 
Representatives, and the Committee on Health, Education, Labor, and 
Pensions of the Senate, a written report that includes an evaluation of 
the effectiveness of the instruction in general principles of financial 
literacy described in section 485(n)(3) of the Higher Education Act of 
1965 (20 U.S.C. 1092(n)(3)), as added by this Act.