The Financial Literacy and Education Improvement Act of 2003 called for the formation of the Financial Literacy and Education Commission with the primary purpose of promoting financial literacy and education nationwide by forming a comprehensive national strategy. However, after three years of activity the Government Accountability Office (GAO) recently reported to Congress that the Commission's work "lacks certain key characteristics that are desirable in a national strategy."
The commission is primarily supported by the Treasury Department's Office of Financial Education and the secretary of treasury serves as the commission's chair. Despite a budget of $3 million over the last three years, GAO's assessment suggests that the commission's has not accomplished its primary mission.
GAO Findings
While the Commission's work thus far is a useful first step in drawing attention to the issue of financial literacy, the GAO found that the majority of the group's work focuses on challenges in improving financial literacy and descriptions of target populations and other financial literacy initiatives. The Commission issues many calls to action, but does not appear to have any specific plan for implementation or action.
The GAO notes that the Commission does not provide:
- Detailed discussions of problems and risks associated with its proposed programs
- Specific goals
- Performance measurements
- Any discussion on the resources it would need to implement its proposed programs
- Recommend any resources or responsibilities for achieving its mission
The resulting national strategy developed by the Commission is "unlikely to have a significant impact on their financial literacy and education efforts," according to the report.
State of College Students
The GAO highlighted an increasing problem in the U.S. as growing evidence shows a substantial number of Americans lack the financial skills necessary to make wise investment choices, increase their standard of living, and set and attain long-term financial goals such as buying a house, paying for college, or adequately funding retirement.
The inaction by the Commission should be equally troubling to financial aid administrators who see more and more students leaving higher education with increased debt levels, including debt outside of the federal loan programs like credit cards and private loans.
Annual surveys distributed by the Jump$tart Coalition for Personal Financial Literacy, a group working to improve the personal financial literacy of young adults, show that the average high school junior and senior consistently score below 55 percent (failing) on tests assessing financial literacy.
Need For National Coordination
Research suggests that more needs to be done to help-college bound youth and all Americans get a better grasp on their financial futures and simple measures like personal finance classes can make a considerable difference. Research conducted at the University of Wisconsin, Measuring the Impact of a Financial Curriculum on Student Attitudes and Behavior showed that students who were required to enroll in a personal finance class had a significantly better chance of taking out less credit card debt, saving more, and practicing sound financial management skills like purchasing renter's insurance.
While many states have proposed legislation that would require financial literacy classes for young adults, surprisingly few of these bills have passed (see a comprehensive list of legislation on Jump$tart's Web site).
College campuses have also taken steps to address this growing problem. Several schools have implemented "Freshman Success Series" and other programs that help students better understand their financial situations. Requiring students to enroll in some sort of financial literacy, personal finance, or other course that focuses on money matters, seems to have merit considering the growth of the problem in recent years.
However, without a national plan, state and institutional efforts will continue to remain uncoordinated and isolated. Because so many organizations have a vested interest in financial education, a national plan would help all entities coordinate their efforts to develop best practices, and help young adults lead more financially secure lives.
By Justin Draeger
NASFAA Assistant Director for Communications
Posted 12/07/06 to www.NASFAA.org. National Association of Student Financial Aid Administrators © 2006. Redistribution to non-NASFAA institutions is prohibited. Please submit Web Site questions or comments to Web@NASFAA.org.
