Financial Literacy—Is There Really Just and Equitable Access?

By Joel Oyuo

Student loan debt is quickly becoming a financial crisis. With the current outstanding national student loan debt ballooning to $1.5 trillion in 2019, it has become apparent to academics, policymakers, and many others that there is an urgent need for the dissemination of financial knowledge, particularly in the realm of student loans.

Research suggests that race is a large determinant of student loan debt. According to one study of more than 500 students, African American college students were 20.9 percent more likely to have student loans of more than $10,000. The study found that low-income families were also more likely to incur debts of more than $10,000. On average, the Brookings Institute found that Black college graduates owe $7,400 more than their white peers.

The level of financial knowledge students have may help explain racial disparities in student loan debt. The Government Accountability Office defines financial literacy as “the ability to make informed judgments and take effective actions regarding the current and future use and management of money.” A multi-school survey of more than 500 students found minority first-year students are significantly less knowledgeable about their student loan debt compared to first-year white students.

Despite its importance as a form of education, financial literacy lacks standardization. Rarely are financial education programs incorporated in school curriculums nationwide. As a result, financial literacy is determined by certain demographic characteristics (e.g., socioeconomic status and race), as well as one’s environment (e.g., residential location).

Standardizing financial aid information and targeting underserved communities is necessary to help all students realize the American dream of going to college.

Given that “meager economic circumstances” can be a major determinant of a student’s financial literacy, it is important to recognize the many racial and ethnic discriminatory practices that impede financial literacy. Bank deserts (or areas without banks) and snob zoning (discriminative residential zoning) are just some of the many barriers that can make it difficult for Black, Latino, Native American, and immigrant families to become financially literate. Bank deserts often arise when certain branches cease to profit in their current locations, driving that branch’s relocation. Research suggests that, while residents in low-income areas are more likely to live in a banking desert relative to people in higher income areas, residents of minority neighborhoods are actually less likely to live in a banking desert. Still, without equitable access to credible financial services, opportunities to become financially literate are unevenly distributed.

Similarly, exclusionary zoning practices (or redlining) limit the availability of financial services in some communities. Historically, government surveyors deemed red zones “credit risks” because of their racial and ethnic composition. Redlining has since resulted in the concentration of low-income and minority households in areas with fewer financial services, including not only mortgages, insurance, and credit cards, but also student loans.

Consistent with earlier researchers’ findings, a recurring theme in our focus groups was the inaccessibility of financial knowledge. In the absence of parents and competent financial advisors, students—especially those of color and immigrants who speak English as a second language—were left to make difficult financial decisions on their own. As one immigrant student noted, “[W]hen I was in high school no one talked about saving for college … Other than the guidance counselor, at home, no one spoke to me about college or even applying for scholarships or even applying for college.”[1] As a student living in an immigrant community, environmental factors including family, friends, and other social networks conditioned the level of financial information he received.

Even in cases where parents are financially literate, minority students still struggle. One focus group participant, a mother of two college graduates who spent 20 years in the workforce, said: “No one talked to either one of my kids about their opportunities. Nobody talked to them about filling out any scholarship applications. No, not a word.”[2] As a Black woman, this participant felt that high school guidance counselors “have their favorites. I know that from my own kids,” she explained. “[I]f you’re waiting on the guidance counselor, it’s not going to happen.”

To offset the challenges undergone by those who are victims of discriminatory practices, disseminating financial literacy services to underserved communities is essential. One successful program is New York City’s Office of Financial Empowerment (OFE) in the Department of Consumer and Worker Affairs, which provides one-on-one financial counseling, including the translation of material, to New Yorkers with low incomes. According to our interview with program staff, OFE follows a rigorous outreach policy in which they closely partner with community-based organizations that target underserved communities. The Office is able to reach low-income families through their 20 citywide Financial Empowerment Centers, which provide financial counseling and coaching “around budgeting, money management, building savings, reducing debt, improving or establishing credit, and also getting access to safe and affordable financial products and services.”[3]

State Employees Federal Credit Union’s (SEFCU) Institute of Financial Well-Being also uses a grassroots approach to educate prospective borrowers in the Capital Region. It offers classes such as “How do I pay for that?,” which teaches high school students about how to use different payment methods including debit cards, credit cards, and checks.[4] Other courses teach basic concepts such as budgeting, saving, and financial goal setting. This model of outreach, including grassroots organization, can help disseminate financial knowledge to underserved communities and may be implemented at the state and local levels of government nationwide.

Access to financial literacy should not be dependent on who you are or where you live. Standardizing financial aid information and targeting underserved communities is necessary to help all students realize the American dream of going to college.


Joel Oyuo is a sophomore in Hudson Valley Community College’s Liberal Arts and Science program with a major in political science, and a Fall 2019 Center for Law and Policy Solutions intern.

The endnotes below refer to tables 1 and 2 in part 1 of this series.

[1] FG_11182019.

[2] FG_11182019.

[3] Interview #06_11252019.

[4] Interview #05_11222019.