Does Financial Literacy Betray Racial Bias?

"In a thicket of complex policy prescriptions for the nation’s student-debt crisis, few carry the homespun appeal of the financial-literacy seminar. Like a warm bowl of chicken noodle soup, lawmakers, families and college officials increasingly savor the simple notion that students might be less broke if they better understood how to manage their money," according to The Chronicle of Higher Education.

"But a provocative recent paper, which drew attention on social media this week, dragged the seemingly innocuous subject of money management into much thornier territory, casting popular financial-literacy programs as racially insensitive and downright degrading to low-income minorities. 'The Political Economy of Education, Financial Literacy, and the Racial Wealth Gap,' written by a pair of public-policy professors, argues that the political appeal of basic financial training perpetuates a false narrative that students of modest means have run up debts not because they are poor, but rather because they are irresponsible.

'The problem with this language is the implicit notion that the racial wealth gap is a matter of financial literacy, choice, and agency, as opposed to inheritance and structure,' write Darrick Hamilton, an associate professor of economics and urban policy at the New School, and William A. Darity Jr., a professor of public policy, African and African American studies, and economics at Duke University.

The paper was published in the most recent issue of the Federal Reserve Bank of St. Louis Review.

Financial-literacy programs, which often include counseling on how to manage credit-card debt and student loans, have come ever-more in vogue in higher education over the last decade. Amid growing scrutiny over the cost of college and concerns about prospective earnings for graduates, a number of colleges have encouraged or required students to participate in some form of education on the basics of personal finance. The Department of Education has given competitive preferences for some grant awards to institutions that provide such programming, and lawmakers in some states have pushed for colleges to offer it."

NASFAA's "Headlines" section highlights media coverage of financial aid to help members stay up to date with the latest news. Inclusion in Today's News does not imply endorsement of the material or guarantee the accuracy of information presented.

 

Publication Date: 4/21/2017


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