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Financial Education and the Debt Behavior of the Young

Meta Brown, John Grigsby, Wilbert van der Klaauw (), Jaya Wen and Basit Zafar

Review of Financial Studies, 2016, vol. 29, issue 9, 2490-2522

Abstract: 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.Received July 9, 2014; accepted December 5, 2015 by Editor Stefan Nagel.

Date: 2016
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Review of Financial Studies is currently edited by Maureen O'Hara

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