Financial Literacy and Academic Outcomes

69 Pages Posted: 20 Apr 2022

See all articles by Daniel Brent

Daniel Brent

Pennsylvania State University

Douglas H. Wrenn

Pennsylvania State University, Agricultural Economics, Sociology, and Education

Date Written: April 7, 2022

Abstract

Outstanding student debt has almost doubled in the past decade to over $1.7 trillion. Delayed graduation contributes to the student debt burden by increasing tuition payments without any additional wage premium. Behavioral theory suggests that young adults are prone to biases limiting their ability to connect short-run actions with long-run outcomes. We attempt to correct these biases using a low-touch financial literacy intervention within a randomized encouragement design at a large public university. We randomly invite and incentivize first-year students to participate in an online tutorial connecting short-run academic success to long-run debt obligations and examine differences in academic outcomes. The intervention increases credits earned and GPA: treated students earn 0.55 more credits per semester and GPAs increase by 0.08. We also find substantially larger effects for underrepresented minorities and less-prepared students. The intervention puts these at-risk students on track to graduate on time, where they would otherwise fall behind. Applying a simply benefit-cost formula, our results suggest that spending one dollar incentivizing financial literacy in this context leads to tuition savings of $115.

Keywords: financial literacy, academic outcomes, randomized encouragement

JEL Classification: D14, G53, I21, I23

Suggested Citation

Brent, Daniel and Wrenn, Douglas H., Financial Literacy and Academic Outcomes (April 7, 2022). Available at SSRN: https://ssrn.com/abstract=4078004 or http://dx.doi.org/10.2139/ssrn.4078004

Daniel Brent

Pennsylvania State University ( email )

HOME PAGE: http://danielbrent.com

Douglas H. Wrenn (Contact Author)

Pennsylvania State University, Agricultural Economics, Sociology, and Education ( email )

University Park, PA 16802-3306
United States

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
391
Abstract Views
1,617
Rank
162,242
PlumX Metrics