Americans choose where they live for many reasons, including access to a quality education for their children. But families may not pay close attention to one educational standard that varies from state to state and can have big implications for financial well-being and, in particular, student debt: high school personal finance content.
There's increasing evidence that students who are required to learn financial literacy as part of a state's education curriculum make better financial decisions across multiple, and critical, early adult-life money decisions. That includes how to pay for college — understanding available grants and financial aid, as well as government vs. private student loans — and avoiding payday lenders and credit card debt.
"Research shows that these requirements make a difference," said Nan Morrison, the president and CEO of the Council for Economic Education, which released its biannual Survey of the States on Wednesday, a detailed state-by-state look at the economics and personal finance standards and requirements in K–12 state education systems.
"College debt is real, and kids in the last population bump are living with it now ... and having kids now. ... The need to be financially responsible is not going away," Morrison said. Individuals need to be "on the ball and in control" earlier in life, she said, and the first step is financial literacy.
Research conducted by two economists at Montana State University, Carly Urban and Christiana Stoddard, indicates that state-mandated financial education high school graduation requirements create more responsible student loan borrowers, increase applications for aid and the likelihood of obtaining grants and scholarships. Their analysis finds more students finance their educations through low-interest federal Stafford loans, and fewer students rely upon high-interest credit card debt.
The new state-by-state survey includes some encouraging developments.
Twenty-one states now require high school students to take a course that integrates personal finance content, which is a net increase of four states since the last survey, conducted in 2018. Iowa, Kentucky, Mississippi, Ohio and South Carolina have added the requirement since the last survey.
"That's what I am happy about," Morrison said. "We're seeing it become more ingrained in the fabric of K–12 education."
Florida, the third most populous state in the U.S., dropped the requirement that personal finance be taught as part of its economics curriculum in the past two years, but it did add a separate personal finance course, though it is not required to graduate and has not been allotted state funding.
"Florida is, I would say, to be determined. It's moving forward, and the Department of Education is taking it seriously," Morrison said, noting recent plans to revise its math curriculum to include personal finance.
Half the country (25 states) now requires high school students to take a course in economics, which increased by three states since 2018 (Hawaii, Ohio and Wyoming).
Only six states require a stand-alone personal finance course to be taken in high school — Alabama, Iowa, North Carolina, Tennessee, Utah and Virginia. But Morrison said integration of personal finance content into existing classes — such as math, economics, civics and career and technology courses — is the most important step. "Is five to eight hours in a course ideal? No? But it is still good for kids starting at zero," she said.
The Montana State University professors find in their research that mandating financial literacy education is more important than the specific format in which it is taught. Improvements in college financing decisions do not results from personal finance being taught as a stand-alone course, they found, but from the critical decision to enact a state-level, top-down mandate.
The Council for Economic Education cited recent data from Next Gen Personal Finance, a nonprofit that provides free resources for personal finance content, illustrating why these mandates are particularly important for children in lower- to moderate-income families. Across the country, in schools where 75% of students eligible for free lunch/reduced lunch, only 3.9% are required to take a one-semester personal finance course.
In states where the personal finance content is not required for graduation, there is a 16-point gap in access to personal finance education. Seventy-two percent of children in wealthier communities have access to personal finance courses, but that drops to 56% in lower- and moderate-income communities.
"It's a social justice issue," Morrison said. "Better education equips kids with the tools to make better decisions, to understand their first paycheck and take better care of themselves and their families."
Melody Harvey, National Poverty Fellow at the University of Wisconsin-Madison's Institute for Research on Poverty, found in a study she conducted that state-level personal finance education requirements make young individuals significantly less likely to borrow payday loans than peers who were not provided the education, across race, ethnicity and gender.
State-level efforts to make students financially literate remain incomplete, notably, in the nation's most-populous state.
Five states (plus Washington D.C.) do not have a personal finance standard in their education systems, according to the survey's criteria: Alaska, California, Montana, New Mexico and Wyoming.
"There's no good reason for this," Morrison said. About California, she added, "This is a state with an incredibly diverse population and big cities with large areas of poverty, a state that constantly has serious financial challenges, but a state with a good education infrastructure at universities. It's hard to believe they would not get behind this to make sure all the diverse population in that state has the opportunity for social mobility and income mobility."
California's history-social science curriculum has included financial literacy since a 2016 revision and the state has plans to add more content in the future. But the Council for Economic Education says that falls short of the set of standards by which it measures all states.
California's state education committee did not provide a comment by press time.
Even after the 2016 revisions, a 2017 Champlain College national report card on state financial literacy education gave California an "F."
While Florida legislators have provided no money for its new personal finance course, money is not the problem in states where these efforts are working.
"Legislators need to realize even a small amount for teachers and professional education here makes a big difference. It costs us less than $150 per teacher for professional development. It's not a big expense," Morrison said.
It often requires no state funding whatsoever, with nonprofit groups providing support.
That was the case in Virginia, which began requiring high school students to have a full year's credit in economics and personal finance before graduation in 2011. With support from nonprofit organizations, such as the Jump$tart Coalition and Next Gen Personal Finance, as well as from Federal Reserve banks, credit unions and investment companies, a state budget contribution is not required for these courses.
Judith Sams, a program specialist at the Virginia Department of Education who has overseen its financial literacy content, said there has been tremendous improvement in understanding of topics like FAFSA, and the difference between a scholarship and student loan, as a result of the state mandate. "Parents are learning from students, and students are making wiser decisions," Sams said. "I have two grandchildren who have gone through it, and I see the difference in how they take care of their money."
New Jersey made financial literacy a requirement for all high school and middle school students in 2019, and even before that official mandate, educators in the state who were proactive in teaching this content found how quickly it can pay off for students.
Montana State's Urban said there are a variety of reasons for state-level resistance. In her home state of Montana, the basic political philosophy is local control rather than statehouse mandate, whether the issue is education or anything else. She also noted that policymakers worry about requiring another course for graduation, which could force students to give up other key classes, such as AP science and math.
"There is always an opportunity cost, and lots of courses you can think about being required and which people are fighting for," Urban said. But she stressed the growing body of research that shows better financial outcomes for individuals in states where personal finance standards are formalized.
Daniel Mangrum, a Ph.D. candidate in the Department of Economics at Vanderbilt University, found in recent research that one year after entering student loan repayment, first-generation and low-income students showed improvement in the probability of paying down their balance if they were subject to a state mandate in high school. He pointed to other research, which finds similar benefits from financial, rather than formal economics, educational content.
"It does seem that state-mandated personal finance education does have benefits for federal student loan repayment and other financial outcomes," Mangrum said. "Coursework should focus on building practical financial skills which are more likely to be retained than the more theoretical financial topics," he said.
Morrison said even in states where the political atmosphere remains challenging, a push is required. "The reality is even without a requirement, parents can go to teachers and principals and superintendents and ask for it to be taught. I don't know why these states don't do it."
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