Fed gov't report to colleges: Require financial literacy courses to slow student loan crisis
A multi-agency government commission has released a report recommending colleges offer mandatory financial literacy programs to educate students on loans and college debt.
The report, “Best Practices for Financial Literacy and Education at Institutions of Higher Education,” was produced by the U.S. Financial Literacy and Education Commission (FLEC). The commission is comprised of 23 government departments, including the departments of Treasury, Labor, Education, Defense, and the White House Domestic Policy Council.
The report estimates that more than 43 million individuals in the U.S. collectively owe more than $1.5 trillion in student loan debt.
“Helping students and their families avoid the pitfalls associated with financing higher education, and empowering them to make optimal financial choices, should be a priority of all institutions of higher education,” the report introduction states. “In order to provide guidance to these institutions, this report establishes best practices for teaching financial literacy and providing information about making financial decisions.”
In addition to suggesting mandatory financial literacy courses, the report officially recommends the integration of financial literacy into the core curriculum of universities, peer educators of financial literacy to be incorporated in colleges, as well as encouraging institutions to communicate financial information more frequently to students.
“Institutions should communicate with students about financial topics more often than upon entrance and exit,” the report recommends. “Financial education might be provided before the start of classes, and as early as acceptance, and be provided in courses throughout the student’s educational experience.”
“In addition to or instead of orientation or student success, financial education could also be part of courses to meet general education or distributional requirements, such as quantitative reasoning and/or social studies,” the FLEC report continues. “Institutions could follow the lead of elementary and secondary schools by integrating financial education into math, economics, civics, other social studies, and business and family education courses.”
While the report notes current federal requirements for student loan counseling both before and after students take on their first loan, it concluded that “these interventions are often not enough, and not well-timed, as students are focusing on many other concerns when they are starting and leaving their education.”
The commission’s recommendations were at least partially informed by a study produced by the National Postsecondary Student Aid Study (NPSAS), which “found that only 28 percent of students could answer three basic financial literacy questions correctly and few students could answer correctly basic questions about federal student loans, with lower-income students scoring worse than the average on both measures.”
“This data shows that institutions should provide financial education broadly to all students, but also need to make sure they are reaching the most financially vulnerable students,” the FLEC report points out.
To inform the committee, FLEC consulted with colleges and universities across the country along with various higher education associations and organizations such as the Institute for College Access and Success, Society for Financial Education and Professional Development, Washington Department of Financial Institutions, Duke University, and Harvard University, to name a few.
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