- Student loan debt in the U.S. now tops $1.4 trillion.
- Financial literacy education in high school leads to better borrowing decisions.
- Students who took classes had lower-cost loans and less credit card debt.
Student loan debt has reached crisis proportions in the United States. Americans ages 19 to 29 carry more than $1 trillion in debt as of the end of 2018, with student loans accounting for a large portion of this amount. The total amount of student loan debt — at any age — is $1.46 trillion as of the fourth quarter of 2018. The student loan debt total increased by $79 billion in 2018.
There must be an answer to this gigantic problem that has young people putting off major purchases and delaying getting married and starting families. Researchers at Montana State University think there is — and it’s surprisingly simple.
Financial Education Is Key
Requiring a personal finance course in high school could improve the complex borrowing decisions that college students are required to make, according to a recent study by two economics professors at MSU. The study, “The Effects of State Mandated Financial Education on College Financing Behaviors,” indicates that students who have financial literacy education in high school will select lower-cost financing options than those who do not. The requirement for financial literacy courses did not change the type of institution the students chose, nor did it affect their decision to attend college.
As of 2017, half of the states in the U.S. require that high school students have some education on financial topics before they graduate. In some cases, states specifically included college financing as part of the curriculum. Other subjects that are included are interest rates, credit, debt, income and saving.
The MSU study found that students who were required to take a financial education course in high school were 3.3 percent more likely to apply for financial aid for college. Ninety-one percent of students from states with no financial literacy requirement applied, versus 94.3 percent of those from states that have this requirement. Likewise, the number of students who took out subsidized Stafford loans, which don’t accrue interest while the borrower is in college, was 5.7 percent higher in the states that require financial literacy courses in high school. Financial literacy could help students pick out the best student loans.
The classes in financial literacy affected more than the students’ choices about college loans. The students who took these classes in high school were 2.1 percent less likely to carry a balance on their credit card than those who did not.
Read on to learn more about the $1 trillion-plus student loan debt.
More on Student Finances
- 10 Best Student Credit Cards of 2019
- How to Consolidate Student Loans
- 15 Ways to Pay Off Student Loans
- Watch: Driving for Uber Can Get You Free College Tuition
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