For centuries, the American dream has been built on obtaining a quality education, obtaining a degree from a degree-granting entity, and then starting a life full of wealth and opportunity. ‘opportunities. Or at least that was the dream bestowed on America’s new dominant workforce: millennials.
Born between 1981 and 1996, during a pop culture boom of multi-million dollar music videos, Millennials grew up inundated with fake images of success and sayings like “It takes money to make money.” These are the messages that influenced their decisions to pay exorbitant tuition fees when choosing their academic and professional paths, ultimately leading many ill-prepared and tax-ignorant souls to obtain student loans in an effort to achieve economic mobility.
The high levels of student debt accumulated by many millennials have several causes, including rising tuition fees and the lack of loan regulations. However, insufficient financial literacy is also partly to blame. Absent from many Kindergarten to Grade 12 programs, policymakers and educators should prioritize efforts to teach students of all ages how to manage their personal resources wisely, especially when it comes to spending money. education. Additionally, delaying financial education until students enter college can and has been disastrous.
Student debt is skyrocketing
During the first wave of millennials entering college between 1997 and 2007, fall enrollment at degree-granting post-secondary institutions increased by 26 percent. As college enrollments increased, so did tuition rates. The prices of undergraduate tuition, fees and room and board at public institutions increased by 31% between 2007-08 and 2017-18, while prices at private non-profit institutions increased by 23%, after adjusting for inflation, according to the US Department of Education.
Yet even these increases cannot fully explain how the United States set a new record for student debt in 2020, topping $ 1.7 trillion for the first time. In the 10 years since the end of the Great Recession in 2009, student loan debt has increased by almost 130%, according to a recent study report published by the Board of Governors of the Federal Reserve System. As for the share of student debt that millennials have accumulated, in Q4 2020, 14 million student loan borrowers aged 25 to 34 accounted for $ 472.6 billion in student debt. Older millennials were lumped together with Gen X (now aged 35 to 49), accounting for $ 466.7 billion in student loan debt in the same quarter.
Focused towards economic and societal realities not known until their generation, including what President-elect Joe Biden called a “K-shapedIn the economy, millennials have paid the price for the savage and savage regulation of student loans – or the lack of it.
Recognizing the damage caused, the US Department of Education finalized in 2019 regulations to protect student borrowers, make higher education institutions more accountable and ultimately save taxpayers $ 11.1 billion over 10 years. Therefore, students born after millennials (Generation Z) will experience a higher education funding reality much more more ethical and regulated and less predatory.
Yet more needs to be done. Class of 2019 college graduates, according to US News & World Report borrowed $ 30,062 on average, representing $ 6,300 more than Class 2009 borrowers. This 26% increase over a decade means that financial literacy, while not the only answer, is an instrument that must be applied in the struggle for deal with this growing financial crisis.
Promote financial literacy
Created by decree-law 13530 in 2010, the President’s Advisory Council on Financial Capability was developed to help the American people understand financial matters and make informed decisions. Three years later, Decree 13646 established the President’s Advisory Council on the Financial Capability of Young Americans. Thanks to the work of these Advice, financial literacy has been defined as “the ability to use knowledge and skills to effectively manage financial resources”.
Government leaders had good reason to be concerned about Americans’ financial literacy. When the second council was created, 15-year-old American students fell short of global expectations for financial literacy in 2012 at the first large-scale global financial literacy assessment. The Program for International Student Assessment (PISA) assessed students in 18 countries on their ability to apply their math skills and basic financial concepts to real-life situations. The American average score ranked ninth.
In recent years, several states have established laws requiring their K-12 schools to teach financial literacy. However, more work needs to be done. A national study Next Gen Personal Finance conducted in 2018-2019 on over 11,000 high school course catalogs found that in 23 states and Washington DC, less than 5% of students were required to take a stand-alone semester of a personal finance course .
When it comes to higher education, financial literacy is not a compulsory course or initiative offered at most colleges. Several years ago, the Free Federal Student Aid Application (FASFA) began to integrate information and Resources to help students improve financial decision making. It was a good start, but still not enough.
To help students make good decisions, colleges should seriously consider recommendations made in a best practice report published in 2019 by the Commission on Financial Literacy and Education. Established under the Fair and Accurate Credit Transactions Act 2003, the commission calls on institutions to provide “clear, timely and personalized information to inform student loans” in financial aid offers and letters of debt. . He suggests that colleges make financial literacy education mandatory with stand-alone classes or by integrating lessons into core curricula, and identifies peer education as a promising way to disseminate financial literacy information to students. students. Since on-time graduation is a guarantee against student loan default, the commission calls on colleges to encourage students to graduate on time and invest useful resources, such as emergency financial aid.
Colleges that adopt these strategies will help better prepare future American workers to make lifelong financial choices that will enable them to participate effectively in our economy, build wealth, and achieve their goals. If pursued and completed correctly, state and federal mandates for financial literacy programs throughout Kindergarten to Grade 12 and higher education could very well be the current education legislation with impact. most sustainable for generations to come.