Financial Education and the Debt Behavior of the Young

• Published in: The Review of financial studies Vol. 29; no. 9; pp. 2490 - 2522
• Main Authors: Brown, Meta, Grigsby, John, van der Klaauw, Wilbert, Wen, Jaya, Zafar, Basit
• Format: Journal Article
• Language: English
• Published: Oxford Oxford University Press 01-09-2016; Oxford Publishing Limited (England)
• Subjects: Consumer credit; Credit reports; Debt; Debt collection; Debt repayment; Economic reform; Economics education; Financial literacy; Graduation requirements; Mathematics education; Outstanding debt; Personal debt; Repayments; Studies; United States; Young adults; Youth; United States > US
• ISSN: 0893-9454; 1465-7368
• DOI: 10.1093/rfs/hhw006

Young Americans are heavily reliant on debt and have clear financial literacy shortcomings. In this paper, we study the effects of exposure to financial training on debt outcomes in early adulthood among a large and representative sample of young Americans. Variation in exposure to financial training comes from statewide changes in high school graduation requirements. Using a flexible event study approach, we find that both mathematics and financial education, by and large, decrease reliance on nonstudent debt and improve repayment behavior. Economics training, on the other hand, increases both the likelihood of holding outstanding debt and the prevalence of repayment difficulties.