To graduate from high school in Georgia, high school juniors and seniors may soon be required to complete a financial education course.
Student loan advocates say it is critical for students to learn about personal finance in school.
Student loan debt in Georgia is among the highest in the US, with an average of $42,000.
A five-minute “you’re not going to default, right?” conversation. Grace Carlock recalls signing her name as a first-year college student on the dotted line. “‘Ok, here’s a loan, just sign here.’ Then there’s the money.”
It would have been nice if Carlock had known what she knows today.
As a result, “I still owe $10,000 more than [the amount of] tuition that I actually borrowed in the first place,” she said. “It’s hard to have a grasp of how compounding interest really works. When you’re that age, you have so little experience with real money.”
While working full-time, Carlock had to pay about $400 a month toward her student loans. Nonetheless, just $15 to $20 was earmarked to pay off the debt.
There was “all that interest,” she said. Having to make that payment each month while still watching the debt rise was disheartening.
Carlock has been able to make interest-free payments on her $55,000 student loan debt because to a temporary freeze on federal loans due to the epidemic.
“Some people are just drowning,” she said. “This is just not sustainable and something’s got to give.”
Meanwhile, the state legislature approved a measure that would require high school students to complete a personal finance class in order to graduate from the state’s colleges and universities.
Bills that were amended by the House will now be sent back to that body for final approval before they are sent to the governor’s desk.
Financial literacy education business EverFi’s president and co-founder Ray Martinez says this is long overdue.
“It’s incredibly important that we better prepare young adults as they’re thinking about their choices that they’re making about their college career,” he said. “Understanding how to save, how to budget, how to manage your finances is a lifelong skill that can really change the trajectory of your life.”
Every year, EverFi conducts a countrywide poll of high school juniors and seniors to gauge their degree of financial literacy.
As a result of the research,
- Only 27% said that they were prepared to estimate their monthly costs following graduation.
- Only 28% reported feeling “prepared” or “extremely prepared” to form a repayment plan for their student debts.
- Only 40% of respondents said that they were “prepared” or “extremely prepared” to determine the entire cost of the universities to which they were applying.
- Only slightly more than half (46 percent) of respondents felt prepared to complete the Free Application for Federal Student Aid (FAFSA).
- 32% of those students felt confident in their ability to read and comprehend loan offers and repayment information.
- Less than half (47%) of students knew how to read a paycheck and how net pay is calculated.
According to Martinez, “I believe many of us have learnt by making errors, and we don’t need to do that anymore.” In order for society to be better off, we need to be able to freely discuss this issue.
It may be too little, too late for people who are already in debt.
In order for individuals to make a solid financial decision, “You can educate people about it, but you have to give them another option,” Carlock added. “Something like capping the interest at some reasonable amount. Tuition is still really expensive. Frankly, we just need relief.”
There has been an extension of the student loan moratorium by the White House until August 31.