Ohio to Increase Financial Literacy Education, But What About Other States?
Financial literacy topics must be taught in Ohio public high schools and should be a part of graduation requirements, said the Ohio Advisory Group on Student Loan Debt Collection, according to the US News & World Report.
“The group also has recommended that colleges help students understand what their debt obligations are when they graduate or withdraw from school,” said the article.
These recommendations were only two of 22 included in a report by Ohio Attorney General Mike DeWine, which he issued last fall.
It went down like this: To ensure fairness in the student loan borrowing and repayment processes, DeWine requested that the Advisory Group examine a few aspects of the procedure.
These aspects included:
- University policies, fees, and penalties regarding unpaid student accounts
- Student education of all responsibilities regarding taking out and repaying student loans
- The university certification process for student debt accounts
- Student loan debt collection strategies within the Ohio Attorney General’s Office
After the in-depth examination, DeWine saw a need for increased financial literacy education.
“According to the Institute on College Access and Success, almost 70 percent of Ohio college graduates leave school with student loan debt. On average, those graduates owe more than $30,000,” said DeWine at the beginning of his report.
Some other recommendations from the report include, according to a Cleveland.com article:
- “All high school students should receive one semester of financial literacy education
- Colleges should encourage student financial responsibility
- Colleges should ensure that all students understand their loan debt obligations upon graduation or withdrawal
- Institutions should notify students that past-due debts would be transferred to the attorney general’s office for collection
- Institutions should adopt uniform standards for fees and penalties and certification practices for all student debt that is to be collected by the attorney general’s office
- Debtors should receive appropriate notice of collections costs”
DeWine’s report and the Advisory Group’s recommendations do not undermine the reality that loans are beneficial, because they provide students with the opportunity to pursue higher education. Nonetheless, they emphasize the conflicts that can arise for borrowers who don’t quite understand how loan debt works.
Ohio is not the only state to require a finance class be taught to students before they graduate high school, but it is one in less than half of the United States.
According to the survey, in 2016:
- Only 20 states required high school students to take a course in economics, which is two less than in 2014
- 17 states required high school students to take a class in personal finance, while only five states offer stand-alone classes in the subject
- Two more states added personal finance to their K-12 standards since 2014, and required that it be taught to students at some point in their academic career before high school graduation
A 2012 PISA study, which polled thousands of teenagers from 18 countries, collected data on the financial literacy scores of 15-year-olds worldwide. According to the study, the United States’ score falls in the middle of the pack, but ultimately, it ranks below average.
Financial literacy issues may creep up as a result of a lack in education regarding the subject, but this 2015 CNBC article discusses how the problems don’t just affect younger people.
“Asked five multiple-choice questions about topics like interest calculations, mortgage payments and investments, just 39 percent of the 25,509 adults answered at least four correctly, according to a 2012 survey from the FINRA Investor Education Foundation,” said the article, which also touches upon how a lack in financial literacy education can pose more problems than just an incompetence about loan debt.
“That was down from 42 percent in 2009. The survey is done every four years.”
The CNBC article acknowledges state efforts to increase financial literacy education in high schools; however, it raises an interesting point about how high school classes aren’t quite as effective as they initially seem.
“Studies have found that the retention rate on financial lessons learned is two years at best,” according to the article, which attributes this information to Ted Beck, the president and chief executive of the National Endowment for Financial Education.
“A comprehensive personal finance education in high school may not fully prepare someone years later to buy a home, understand his workplace benefits, or save for retirement, especially with a rapidly shifting array of financial products and tools in the mix.”
Even with the given two-year time frame, financial literacy high school courses should help students in taking out loans for college.
While at least some states require students to take economics and financial literacy classes, the subjects are not required in many other states’ curriculums. It is possible that Ohio’s decision and subsequent announcement to increase its financial literacy education will have an effect on other states.
Student loan debt is the second-highest consumer debt category, so it is likely that each state will have to reevaluate its financial literacy education programs and requirements at some point. More students are graduating from high school now than ever before — but without proper financial literacy and economics education, it could be difficult for them to successfully pursue higher education through loan borrowing.
Elizabeth hails from New Jersey and studies journalism at Emerson College, where she works for two publications: a lifestyle magazine and a music magazine. In addition to education, she also enjoys writing about health and fitness and pop culture.