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New NEFE-Funded Research: How State-Mandated Financial Education Drives College Financing Behavior

Posted March 13, 2019 by Raven Newberry

Findings from a NEFE-funded study out of Montana State University build a compelling case for K-12 state mandated financial education. States with personal finance graduation requirements shifted students from high-cost to low-cost financing options for college. These students were more likely to apply for aid, accept lower cost federal aid options and even carried lower credit card balances.

This study deemed a state to have a personal finance mandate if it required students to participate in financial education in order to graduate. These mandates varied state-to-state, and only three states included postsecondary education financing explicitly in their requirements. Utah, Texas, and Tennessee all cover the FAFSA and other aspects of school funding in their mandates.

The overall findings found a few key trends:

  • These mandates did not affect students’ college enrollment decisions. This suggests that students may have already made up their mind about what institution they will attend, but this basic financial decision was not majorly changed.
  • Applications for aid increased 3.5 percent in states with mandates. This is particularly significant because the rate of participating in aid applications was already fairly high, at around 90 percent.
  • Students were more likely to accept federal loans, and overall private loan balances decreased. This trend indicates students who participated in financial education were making savvier financing choices.
  • Credit card use decreased and students were less likely to work while in school.

Overall, these findings indicate requirements enhance student outcomes, and that these benefits extend beyond college financing decisions. The researchers also believe these effects are likely understated and that there would be cumulative benefits over the course of a student’s college career. They also pointed to a need for a standardized definition of financial education as the set mandates looked very different state-to-state.

Read the full report here.