Pandemic Helps Stir Interest in Teaching Financial Literacy

In the latest round of legislative proposals, some states are merely encouraging the teaching of financial skills while a few would make the subject a graduation requirement. Ohio, for instance, is considering a proposal that would require high school students to pass a half-credit class in personal finance in order to graduate. The class must be taught by a teacher trained in the subject matter.

The bill would also create a fund to help pay for training to teach the subject, said State Senator Steve Wilson, a Republican and former banking executive who co-sponsored the bill. He said he was hopeful that the bill would be voted out of committee this month.

“Kids come out of school having no clue about financial literacy,” Senator Wilson said. “You go out into the world greatly disadvantaged.”

Many financial literacy advocates consider a full-semester course the gold standard for personal finance instruction. Rebecca Maxcy, director of the Financial Education Initiative at the University of Chicago, said many courses focused mainly on skills, like writing a check or filing taxes. While those lessons can be helpful, she said, it’s important for courses to include discussions of how personal values and attitudes about money influence behavior, as well as an examination of the financial systems and potential barriers that students will encounter in the world of money.

Questions like “Who benefits when you open a bank account?” can prompt meaningful discussions, she said.

Some curriculum options, however, offer more condensed, basic instruction.

Everfi, a digital instructional company, offers a free seven-session program for high school financial literacy. Students take interactive, self-guided lessons in topics like banking, budgeting and college financing.

Sidney Strause, a freshman at Marshall University in West Virginia, said she had taken Everfi’s course as a junior in high school. The lessons were assigned as part of another course she was taking, and typically took 45 minutes to an hour to complete.

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A Novel Way to Finance School May Penalize Students from HBCU’s, Study Finds

The typical student who borrows to attend college leaves with more than $30,000 in debt. Many struggle to keep up with their payments, and America’s ballooning tab for student loans — now $1.7 trillion, more than any other type of household debt except for mortgages — has become a political flash point.

So a financing approach known as an income-share agreement, which promises to eliminate unaffordable student debt by tying repayment to income, has obvious appeal. But a new study has found that income share agreements can also mask race-based inequalities.

The analysis, released on Thursday by the Student Borrower Protection Center, an advocacy group, found that borrowers at schools that focus on minority students can end up paying more than their peers at largely white campuses.

Income-share agreements are offered mainly by schools, although some private financiers have started marketing them directly to students. The selling point of such agreements is that, unlike loans, they don’t accumulate interest, and they come with both a predetermined repayment period and a cap on the total amount that the lender can seek as repayment. To students leery of accumulating educational debt that can snowball and stick around for decades, income-share agreements can offer a more flexible alternative.

Silicon Valley investors who are funding start-ups, as well as some policymakers. A growing number of colleges and vocational training programs are letting students finance some or all of their studies with such contracts. Purdue University was the first to offer them widely, starting in 2016. Private schools including Lackawanna College and Clarkson University have followed suit. Vemo Education, a venture that manages I.S.A. programs, said it has worked with 70 schools and training courses.

But the market is opaque and lightly regulated, making it challenging for borrowers to find the kind of consumer-protection disclosures that typically accompany financial products. Financiers are generally not required to reveal any information on how much money they have lent and how those deals have worked out for borrowers.

Student Borrower Protection Center researchers obtained data from the website of one private financier, Stride Funding in Dallas, and studied its agreements to illustrate how they can contain buried inequities. (Other companies that market the agreements directly to students include Align, Defynance and Lumni.)

Like most lenders in this market, Stride varies its repayment terms depending on the borrower’s earning potential. An English major typically will need to fork over a higher percentage of salary than an engineering student. (Stride caps its maximum repayment amount at two times the amount that was borrowed. Its contracts typically require recipients to make payments for five to seven years.)

repay 5.65 percent of their income for five years, according to a payment calculator on Stride’s website. But the same calculator showed that an economics student at Morehouse, an historically Black school in Atlanta, would be asked to repay 6.15 percent of their income.

asked the Consumer Financial Protection Bureau last year to investigate several lenders that they said might be discriminating against women and minority borrowers by charging them higher rates, based on their lending algorithms.

“The risk of discrimination arises because the lender is not evaluating the applicant based on their own characteristics, but instead based on the characteristics of other students at their school or who were in the same major or program,” the lawmakers wrote.

Officials at the NAACP Legal Defense & Educational Fund got an early look at the Student Borrower Protection Center’s report and found it disturbing. Stride’s lending might run afoul of the Equal Credit Opportunity Act, they said in a letter sent to the company on Thursday morning.

“Particularly given how the economic fallout of the ongoing Covid-19 pandemic has disproportionately hurt Black Americans, the need for equitable access to consumer financial products and services is more important than ever,” the fund said in the letter, which was also signed by Mr. Frotman’s group.

Ms. Michaels said Stride “shares the goals” of the two groups and “is excited to have the chance to work with them on our shared mission of providing access to financial products to those who have long been left out of traditional credit marketplaces.”

told Forbes that her company anticipated making loans to 1,800 students this year.

Government regulators have been keeping a cautious eye on the emerging market. Rohit Chopra, President Biden’s nominee to run the Consumer Financial Protection Bureau — which is often the federal enforcer of fair-lending laws — has spoken frequently about the risk of bias in algorithmic lending decisions. (Mr. Chopra, a commissioner on the Federal Trade Commission, is awaiting a Senate vote on his nomination.)

“Our student debt market is definitely broken, and it needs a massive overhaul,” Mr. Chopra said at a conference last year. “I’m not sure that new products like income share agreements will be an antidote, especially if they worsen disparities.”

Ashok Chandran, a lawyer at the NAACP fund, said he hoped state and federal watchdogs would pay close attention to the novel lending products. “This market operates in such a regulatory dark space,” he said. “We’re pretty troubled by the report, and in particular by how stark the disparities are.”

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