Our college graduates, our hope for the future of this country, are in a whole bunch of financial trouble. They are drowning in student loan debt, they’re beginning to miss payments, or they’re already in default and trying to negotiate new payback options, or they’re taking out additional loans to repay the first ones.
Families Have High Student Debt
The class of 2018 graduated with an average student loan of $29,800, with 69% of students taking out loans, and 14% of their parents taking out federal Parent Plus loans in the amount of $35,600 average per household. All together, about 45 millions Americans owe $1.6 TRILLION dollars in student loan debts, and as higher education costs continue to rise, so will the debt ceiling.
But how did we get here exactly? Many factors have contributed to these excessive student loans amounts including, obviously, rising education costs is the primary reason. But there may be another factor at work here.
Both the Council on Economic Education and the Financial Literacy and Education Commission (which includes the Treasury Department and the Department of Education) have begun to weigh in on the student debt crisis, but they’re doing so with the best tool they have-education. In other words, they believe that the current generation which is graduating with mountains of student loan debt was unfortunately not privy to any kind of financial literacy courses in either high school or college.
This left these students with less than ideal money management IQ, which makes it difficult for them to get and stay out of debt altogether. But on the urging of the Council of Economic Education, local public school systems, and even colleges, have plans to change that.
Financial Literacy for Teens
Finally, after years of almost little financial curriculum in high schools at all (except for maybe a one week unit somewhere that forces kids to make a budget and pay bills with an imaginary 6 figure salary), all across the country attention is being paid to putting in place a real financial literacy curriculum in high schools.
And we’re not talking about just adding some type of new financial literacy standards which only require a small unit type course of study, we’re talking about actual semester long personal finance classes that cover everything one needs to learn to make smart money decisions throughout their life.
Recent data indicate that people across the U.S. believe that financial literacy should be taught in schools. In a survey conducted between August 13th and August 15th 2019, the National Financial Educators Council asked 1,211 people, “Do you think high school students should take personal finance courses in high school?” More than 81% responded that students should take financial literacy coursework
Last year, only 17 states had a financial literacy requirement for graduation, but already this year several more states are making an effort to both bring and require financial literacy standards and classes in high school. In Florida, lawmakers are considering a bill that would require all public high school students to take a semester long, half credit, stand alone course in financial literacy and money management. If the bill passes, Florida will become one of six states to require a stand-alone class.
It’s vitally important that we reach high schoolers and ensure they’re financially savvy because right after graduation, thousands of them will make one of the biggest and most important financial decisions of their lives-how much they will spend on college, and how they will pay for it. Currently, we’re essentially telling 18 year-olds who can’t read a pay stub that we trust they know what tens of thousands of dollars in loans not only looks like, but what their lives are going to look like when they begin to pay it back.
But it’s not only high schools that are attempting to remedy the deficiencies in financial education. In a recent report by the Financial Literacy and Education Commission, recommendations about how colleges and universities can include personal finance classes were offered, as well as changes in how federal student aid is disbursed.
Some of the changes in student aid include more detailed financial aid offer letters that must include “an itemized and sub-totaled cost of attendance,” and a broader adoption of “debt letters” which are only required in 12 states currently. The commission also recommended that debt letters should clarify “repayment options, estimate how much interest will pile up if payments are deferred and provide average entry-level salaries for graduates with the same sort of major.”
Helping Families Better Understand the Financial Implications of Paying for College
It is the goal of the commission that all places of higher education make it a priority to help students and families avoid the pitfalls that come with financing education, and help them make the right financial choices for their family. Mark Brown, chief operating officer at Federal Student Aid, an office of the U.S. Department of Education, said, “The Department is committed to improving student financial literacy so students and their families are empowered to make better and more informed decisions about their education.”
To check and see what financial literacy classes and curriculum is being taught at your child’s high school, you can visit checkourschool.org, which is a campaign created by the non-profit Jump$tart Coalition for Personal Financial Literacy.
If you’re interested in how to start and/or support a financial literacy program in your area, check out the Council on Economic Education’s Advocacy Tool Kit. https://www.councilforeconed.org/policy-and-advocacy/toolkit/
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