More Needs to Be Done to Make Minority Students Financially Literate, Panel Says
Black and Hispanic households are less knowledgeable about their options for financing college, resulting in reduced access to higher education opportunities, said a panel of experts Wednesday at a forum sponsored by the Pell Institute for the Study of Opportunity in Higher Education and the Council for Opportunity in Education.
May 5th, 2008 at 2:54 am
In considering giving credit to low income communities, education is a necessary primer. Too often in my daily work as a financial counselor for a non-profit financial literacy organization, I see low income individuals who through misinformed use of credit have actually worsened their financial situations. For many of my clients, getting an envelope in the mail which reads “you’ve been pre-approved” seems like a sign of hope and better times to come. For others it simply builds a false sense of financial security.
Most clients fall into two categories. Members of the first group are unemployed, disabled, or retired and barely have enough money to live, and cover basic expenses, let alone keep up with the growing American consumer patterns. The second group is made up of working people who out of a desire to keep up with their neighbors purchasing patterns uses debt items to consume beyond their typical levels. They have a hard time differentiating between needs and wants. For both these groups savings rates are dismal, and often non-existent. When a credit card is issued to members of the working class group, the reaction is to over consume and fall further into debt. Many members of this group have never received any type of financial education which would have allowed them the knowledge to make safer credit use decisions. In the process, not only is debt racked up, but credit scores are hurt which in turn makes these same folks ineligible for the financial products that would allow them to build a safe financial base.
Financial education programs are the best tool to help low income Americans make the right decisions in regards to their use of credit. Since many of these same low income Americans attend college at lower rates, it would be most beneficial to implement these programs at the early high school level. These types of education programs would address the current American credit crisis from a demand side rather than relying on creditors, who have historically made lending decisions that benefit them rather than the consumer.