The effects of high school personal financial education policies on financial behavior

Consumer Credit Panel/Equifax panel data on young adults followed quarterly from age 18 to just before 22, in three treated states (Georgia, Idaho, Texas) against synthetic controls built from 25 states with no mandate

US young adults aged 18-22 with credit files, graduating high school around the 2007 implementation of personal-finance graduation requirements in Georgia, Idaho and Texas.

Synthetic-control difference-in-differences: for each treated state a weighted combination of non-mandate states is fitted on pre-period GDP, income, poverty, house prices, unemployment, educational attainment, racial composition, per-pupil expenditure and (in one specification) NAEP maths scores, then post-mandate cohorts are compared to it with state and quarter-by-year fixed effects. Numbers below are read from the Federal Reserve Board working-paper version (FEDS 2014-68), which the published Economics of Education Review article develops. Three caveats a reader should apply before believing 28.7 credit-score points. (1) The mandates took effect in 2007 and the outcomes are credit scores and delinquencies measured from 2008 to 2012 — precisely the financial crisis. Quarter-by-year fixed effects absorb the national shock, but Georgia's housing bust was far from national-average, and the synthetic control is matched on pre-crisis characteristics. (2) Only three treated states, so conventional inference is fragile. (3) The effect grows monotonically with cohort in every state, which the authors read as teachers learning the curriculum; a differential post-treatment trend would look identical. Funded in part by a grant from the FINRA Investor Education Foundation.

Young adults exposed to a state financial-education graduation requirement have higher credit scores and lower delinquency rates than synthetic-control peers, and the effect grows with each successive exposed cohort. In Georgia, credit scores were 13.4 points higher for the second post-mandate cohort and 28.7 points higher for the third (both p < 0.01); 30-day delinquency on any account fell 0.2, 0.5 and 1.5 percentage points in cohorts one to three (against a 15.6% base, so roughly a 10% relative reduction), and 90-plus-day delinquency fell 0.5, 2.0 and 3.6 points (against a 17.8% base, a 20.2% relative reduction). Thirty-day auto-loan delinquency fell 1.7 points against a 3.4% base — a halving. Idaho showed a 7.2-point DECLINE in the first cohort before turning positive (+2.0, then +6.6). The mandates do not change the fraction of young adults who have a credit file at all.

Low. Treatment is a state graduation requirement imposed on entire cohorts, not chosen by families; the identifying comparison is between adjacent graduating classes within the same state. The authors note that if some students coded as treated did not receive the education, the estimates are biased toward zero.

The credit-outcome result is contradicted for an earlier era by Cole, Paulson & Shastry (2016), who study personal-finance mandates from 1957-1982 with census and the same Equifax panel and find no effect on credit score, delinquency, bankruptcy or foreclosure. The two are reconcilable — Cole et al. themselves suggest the newer mandates comprise actual course requirements while many older ones amounted to a one-off lecture from a bank representative, and that their sample is older (22-28) so effects may dissipate with age. That reconciliation is a hypothesis, not a test. Stoddard & Urban (2020) find concordant effects on college-financing choices from the same policy variation and partly the same team.