The state of financial knowledge in college

Abstract

Financial literacy has been evaluated in many different surveys of American adults and children. College students are a dynamic population who face unique financial challenges, yet they have not been broadly sampled as part of existing work measuring financial literacy. This is a notable void in the literature given the rapid increase in college prices and the number of students who finance their college investment using loans. The 2015–16 National Postsecondary Student Aid Study (NPSAS:16) included, for the first time, a standard set of financial literacy questions as well as a new set of questions measuring awareness of student loan repayment terms. Students demonstrated objectively low levels of financial literacy, but levels were higher among groups with social, demographic, economic, and institutional characteristics that are predictive of success in college. Student borrowers tended to have higher student loan literacy, even if they were part of groups with lower financial literacy. We conclude from this that financial literacy is distinctive from student loan literacy and that student loan literacy appears to be learned through experience.