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Personal finance education mandates and student loan repayment

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  • Mangrum, Daniel

Abstract

This paper estimates the impact of requiring high school students to complete personal finance education on federal student loan repayment behavior after college. I merge student loan borrowing and repayment data from the College Scorecard with data from the Integrated Postsecondary Education Data System on counts of high school graduates enrolling in college from different states. I estimate the causal effect of personal finance education mandates by relating the change in the share of university students subject to a state mandate to changes in university cohort student loan outcomes. I find only students with higher-income parents respond by adjusting borrowing, reducing median balances by 7%. By contrast, first-generation and low-income borrowers bound by mandates did not significantly adjust borrowing, but were nonetheless more likely to pay down balances. Repayment improvements are in part due to better understanding of the terms governing federal student loans. State mandates that incorporate career research alongside personal finance education are associated with better student loan repayment than those focused only on personal finance education.

Suggested Citation

  • Mangrum, Daniel, 2022. "Personal finance education mandates and student loan repayment," Journal of Financial Economics, Elsevier, vol. 146(1), pages 1-26.
    • Handle: RePEc:eee:jfinec:v:146:y:2022:i:1:p:1-26
    DOI: 10.1016/j.jfineco.2022.06.006
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    4. Daniel Frank & Rakshith Bhandary & Sudhir K. Prabhu, 2024. "Higher Education Loan Schemes Across the Globe: A Systematic Review on the Utility Derived and Burden Associated with Educational Debt," JRFM, MDPI, vol. 17(12), pages 1-17, December.
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    6. Luedtke, Allison Oldham & Urban, Carly, 2021. "Do High Schools Choose Financial Education Policies Based on Their Neighbors?," IZA Discussion Papers 14288, Institute of Labor Economics (IZA).
    7. Kaiser, Tim & Lusardi, Annamaria & Menkhoff, Lukas & Urban, Carly, 2022. "Financial education affects financial knowledge and downstream behaviors," Journal of Financial Economics, Elsevier, vol. 145(2), pages 255-272.
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    More about this item

    JEL classification:

    • D14 - Microeconomics - - Household Behavior - - - Household Saving; Personal Finance
    • G51 - Financial Economics - - Household Finance - - - Household Savings, Borrowing, Debt, and Wealth
    • G53 - Financial Economics - - Household Finance - - - Financial Literacy
    • I22 - Health, Education, and Welfare - - Education - - - Educational Finance; Financial Aid
    • I28 - Health, Education, and Welfare - - Education - - - Government Policy
    • J24 - Labor and Demographic Economics - - Demand and Supply of Labor - - - Human Capital; Skills; Occupational Choice; Labor Productivity

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