Financial Literacy and Investments in Higher Education * 
 
 
 
Fernando Lopez† 
 
 
 
 
This version: September, 2014 
 
 
 
Abstract 
 
Using a rich data set from a large U.S. non-profit organization, I find that low 
income post-secondary students are poorly informed about three main financial 
aspects of their higher education: future income, financing costs and opportunity 
cost of being enrolled. This result holds for students who are academically talented, 
have been exposed to financial education (including a semester-long personal 
finance class) and relevant financial experiences. Furthermore, the first round of 
results of a randomized controlled trial (N=117) suggests that an hour-long 
financial education workshop on the main financial aspects of college increases 
students’ GPA by 0.2 points (p-value=0.15) and their ability to receive financial aid 
from the non-profit organization by 11.4 percentage points (p-value=0.25).  
 
 
 
JEL: G11, D14, J24, R20 
 
Keywords: financial literacy, financial education, financial aid, human capital, 
randomized controlled trial. 
 
 
                                                             
* I am very grateful to the staff members of the Scholarship Foundation of St. Louis for providing 
access to the data that I use in this study. I am especially thankful to Faith Sandler and Maria 
Rebecchi for the several discussions about the Foundation’s programs and target population; and to 
Rob Foley for his help to access and use the data. I am also thankful for the comments and 
suggestions from seminar participants at Washington University (business economics brown bag), 
Universidad Alberto Hurtado, Universidad Adolfo Ibáñez, Missouri Department of Higher Education 
and staff and board members of the Scholarship Foundation of St. Louis. All errors are mine. 
†
 School of Business and Economics, Universidad Alberto Hurtado. Email: felopez@uahurtado.cl  
2 
 
1. Introduction 
 
Higher education is a key investment opportunity for young individuals. It is 
a major source lifetime well-being that arises from a higher expected income (Avery 
and Turner, 2012) and a wide array of non-pecuniary benefits (Oreopoulos and 
Salvanes, 2011). Yet, there is little known about the extent to which students 
understand and take into consideration the financial aspects of this decision. 
Addressing this question is important because investments in higher education are 
highly complex and this raises the possibility that individuals engage in suboptimal 
decision making. Indeed, students have to decide whether or not they want to enroll 
in a post-secondary institution, and if they do, they face a menu of thousands of 
educational institutions, dozens of areas of study and several sources of financing 
for their higher education. More importantly, there is growing evidence suggesting 
that students engage in suboptimal enrollment and financing decisions 1 . In 
addition, despite personal finance education mandates for high school students are 
increasingly popular in the U.S.2, there is little evidence on the extent to which they 
improve career choices, which is arguably the main financial decision faced by 
young individuals. In particular, although several studies use survey data to assess 
the level of financial literacy of high school and college students3, these efforts 
provide little evidence on the extent to which they have specific knowledge about 
financial aspects of their higher education. 
                                                             
1 For instance, Bettinger et al (2012) finds that low income individuals who received a streamlined 
process to complete the Free Application for Federal Student Aid (FAFSA) for themselves or their 
children were more likely to apply for financial aid, enroll and persist in college. A large fraction of 
high-achieving low income students do not attend selective schools partly because of lack of 
information about their opportunities at these institutions (Avery and Hoxby, 2013; Hoxby and 
Turner, 2014). Similarly, many low income students rely on credit card debt when they could instead 
borrow federal subsidized loans (Avery and Turner, 2012) and nearly one third of undergraduate 
students who were eligible to receive between up to $4,300 in Pell Grants from the federal 
government in 2007-2008, did not apply. 
2  As of March 2014, 17 (22) states require that high school students take a personal finance 
(economics) class in high school (Council of Economic Education, 2014).   
3 Some examples of this literature are Chen and Volpe (1998), Bernheim, Garrett and Maki (2001), 
Mandell (2009), Lusardi, Mitchell and Curto (2010) and Cole, Paulson and Shashtry (2013).  
3 
 
The first question I study in this paper is to what extent are students 
familiar with the financial aspects of their higher education?  Specifically, I consider 
three main financial aspects of this investment: future income, financing costs and 
opportunity cost of being enrolled. The main ingredient for this analysis is a rich 
survey and administrative data set of students who received financial aid from the 
Scholarship Foundation of St. Louis (SF), which is one of the largest U.S. non-profit 
organizations that provides grants, interest-free loans and financial advice to low 
income individuals from the St. Louis area. Overall, I find that students are poorly 
informed about the main financial aspects of higher education. Indeed, only one out 
of three students has ever tried to determine the monthly income they will earn 
within the first two years of graduation; one out of four students correctly ranks the 
costs of major sources of funding available to them; and, one out of four students 
considers as a cost the income they would forego if they need one extra year to earn 
their degree. 
This low level of financial literacy among students in the sample is surprising 
for a number of reasons. First, these students are academically talented. Their 
average ACT score is 23 points (or 68 percentile in the national rank)4 , their 
average high school GPA is 3.4 and 72 percent of them received some recognition for 
their academic achievements in high school. Second, 85 percent of the students in 
the sample passed a semester-long personal finance class in high school, which is a 
high school graduation requirement for students in the Missouri public education 
system5. Furthermore, 69 percent of the students who took this class passed it with 
an “A” grade. Third, more than half of the students have work experience and thus 
have received income from work. Fourth, all students received an acceptance letter 
from a post-secondary institution and thus have been exposed to different sources of 
financing for their higher education, including scholarships and federal loans. In 
addition, nearly 40 percent of the students passed the entrance counseling for 
                                                             
4 This figure is based on high school students who took the ACT test and graduated in the period 
2011-2013. Source: http://www.actstudent.org/scores/norms1.html, accessed on 2/19/2014. 
5 Missouri is one of the 17 states in the U.S. in which passing a personal finance class is a high 
school graduation requirement (Survey of the States, 2014).  
4 
 
federal loans, which describes the terms and conditions associated with the use of 
those loans. Fifth, nearly two thirds of the students in the sample have at least one 
member in their family who is or has been enrolled in a post-secondary institution.  
I also find that the association between the level of knowledge about financial 
aspects of higher education with academic achievement, exposure to different 
sources of financial education, financial experiences, socioeconomic and 
demographic characteristics is small. 
Having established that students are poorly informed about financial aspects 
of their higher education, I address a second question: to what extent does financial 
education that focuses on future income, costs of different sources of financing and 
the opportunity cost of staying too long in college, affect students’ academic 
performance and ability to receive financial aid? One the one hand, this financial 
education can increase academic effort by increasing students’ awareness about 
their potential returns to education and de-biasing the beliefs of students who 
underestimate the opportunity cost of non-academic activities such as leisure and 
paid work. Similarly, since most students are not aware of the costs of different 
sources of financing for higher education, students who participate in the workshop 
can be more likely to keep in good standing with institutions that provide merit-
based financial aid. In particular, participation in the workshop can improve the 
quality of applications to renew the financial aid from the SF because it offers the 
loan with lowest interest rate and least stringent terms available to students in the 
sample6. An alternative hypothesis is that financial education on the main financial 
aspects of higher education will not change the way in which students invest in 
their human capital. This can be the case, for instance, because the social and 
institutional environment in which students are involved provides them with the 
right incentives to allocate their time and effort across different activities, including 
study and applications for financial aid. 
                                                             
6 The average financial aid package for renewing students was $6,767 in total ($817 of which are 
from grants and $5,950 from interest-free loans). Raising this capital from unsubsidized federal 
loans, the next cheapest alternative source of financing available to these students, would increase 
their financing costs by about $6,000 over a 10 year repayment period. 
5 
 
I consider a randomized controlled trial that provided a financial education 
workshop to students who received financial aid from the SF for the first time 
during the fall of 2012 and 2013. The main topics covered were future income, the 
cost of different sources of financial aid and the opportunity cost enrollment. 
Instructors particularly emphasized the financial aspects associated with different 
uses of time (work versus study) and the cost differences among different sources of 
financial aid. The workshop was one hour long and the format was a traditional 
lecture. The impact evaluation of the workshop on academic performance and 
financial aid is only based on students who were first-time recipients of financial aid 
in the fall of 2012 and renewed this aid in the cycle January – April 2013. At the 
time of this study, I do not have yet academic and financial aid data for students 
who were first-time recipients of financial aid in the fall of 2013 because the 
deadline to submit their renewals is April 15th, 2014.  
I find that participation in the workshop increases the average college GPA 
by 0.2 points, obtained as the difference between 3.2 points in the treatment and 3.0 
points in the control group. Although the magnitude of this estimate is one third of 
a standard deviation of the college GPA in the sample, the p-value is only 15%. In 
addition, I find that students who participated in the workshop are 11 percentage 
points more likely to receive grants and interest-free loans from the SF for a second 
year. The p-value of this point estimate is 25%. Overall, this evidence on the 
impacts of the workshop is inconclusive due to the small sample size (120) of the 
first round of the experiment. However, if the results of the second cohort of 
students who participated in this experiment were the same than those from those 
who participated in the first round, the effects would be significant at conventional 
levels of significance. Since the experimental conditions of both cohorts of students 
are similar, in terms of students’ observable characteristics and exposure to the 
workshop, there is a high chance to observe significant effects with a larger sample 
size. 
This paper contributes to the literature that studies financial literacy and its 
determinants. The main contribution to this literature is that I provide new 
6 
 
measures of financial literacy related to investments in higher education, a main 
financial decision faced by young individuals. Second, this paper is related to a 
growing literature documenting the presence of suboptimal choices in the way low 
income students make their enrollment and financing decisions (Avery and Hoxby, 
2013; Avery and Turner, 2012; Bettinger et al., 2012; Hoxby and Turner, 2014). In 
particular, the results in this paper suggest that financial literacy can be an 
explanation for several puzzling facts documented in this literature7. Third, this 
paper also contributes to a growing literature documenting the effects of financial 
education (e.g. Willis, 2010; Fernandes, Lynch and Netemeyer, forthcoming) and 
financial education mandates in the U.S. (Bernheim, Garrett and Maki, 2001; 
Mandell, 2009; Carlin and Robinson, 2012; Cole, Paulson and Shashtry, 2013; 
Hastings, Madrian and Skimmyhorn, 2013; Brown, van der Klaauw, Wen and 
Zafar, 2014). In particular, I provide evidence on the heterogeneity of contents 
covered by different high schools and also the low level of awareness about the 
financial aspects of higher education of students who passed these classes. Fourth, 
and more broadly, the results of the randomized field trial suggest a new potential 
underlying mechanism to understand the relation between financial literacy and 
wealth accumulation (Lusardi and Mitchell, 2007; Behrman, Mitchel, Soo and 
Bravo, 2012): investments in higher education. Finally, this paper also contributes 
to the vast literature on human capital accumulation by challenging the core 
assumption that individuals understand and take into consideration the three main 
financial aspects of higher education: future income, financing costs and 
opportunity cost of schooling.  
                                                             
7 For instance, Bettinger et al (2012) finds that low income individuals who received a streamlined 
process to complete the Free Application for Federal Student Aid (FAFSA) for themselves or their 
children were more likely to apply for financial aid, enroll and persist in college. A large fraction of 
high-achieving low income students do not attend selective schools partly because of lack of 
information about their opportunities at these institutions (Avery and Hoxby, 2013; Hoxby and 
Turner, 2014). Similarly, many low income students rely on credit card debt when they could instead 
borrow federal subsidized loans (Avery and Turner, 2012) and nearly one third of undergraduate 
students who were eligible to receive between up to $4,300 in Pell Grants from the federal 
government in 2007-2008 did not apply. 
7 
 
The rest of the paper is organized as follows. In section 2, I describe the data. 
In section 3, I show the extent to which students are knowledgeable about the 
financial aspects of their higher education and its relationship with academic 
achievement in high school, exposure to financial education and financial 
experiences.  In section 4, I present the results of a randomized controlled trial that 
evaluates the effect of the financial literacy workshop on students’ academic 
performance in college and their ability to receive financial aid one year after the 
workshop. In section 5, I provide a discussion about the results. Conclusions are in 
section 6.  
 
2. Data 
 
a. Sources of Data and Institutional Context 
 
I use survey and administrative data from the Scholarship Foundation of St. 
Louis (SF)8. The SF is one of the largest American non-profit organizations that 
provides grants, interest-free loans and financial advice to low income students in 
order to help them to finance their higher education. Grants and interest-free loans 
have to be renewed on a yearly basis. In a calendar year, the SF has two application 
cycles: January 1st – April 15th and August 1st – November 15th. The sample is from 
students who meet two conditions: (i) submitted an application to the SF for the 
first time in January – April 2012, August – November 2012 or January – April 
2013, and (ii) were selected to receive grants and interest-free loans. 
Complete applications include a comprehensive application form, high school 
transcripts, the Free Application for Federal Financial Aid (FAFSA), the award 
letter from the post-secondary institution where the student is enrolling in, essays 
and recommendation letters. From the application form, I obtain socioeconomic and 
demographic information: age, ethnic origin, whether someone else in the student’s 
family has ever attended college and self-reported ACT scores. I use high school 
                                                             
8 http://www.sfstl.org/ 
8 
 
transcripts to obtain students’ GPA, average GPA in math courses, information on 
whether they took a personal finance class and the grade in that class. I use the 
FAFSA to find financial information such as the expected family contribution 
(EFC)9 to student’s higher education. From the award letter, I extract information 
about students’ cost of attendance (tuition + room & board) and financial aid 
package provided by the university. 
The selection process for eligible10 students is based on three main criteria: 
academic potential, financial need and personal character. Academic potential is 
measured by grades in high school, ACT scores and academic awards. Financial 
need is defined as the cost of attendance minus the amount of grants, minus the 
amount of subsidized loans from the Federal Government and minus the EFC11. 
The SF provides interest-free loans to students whose financial need is greater than 
zero and smaller than the maximum loan amount. The maximum loan amount for 
the years 2012 and 2013 was $7,000 and $9,000 respectively. The third evaluation 
criterion, character, is determined by developing an overall impression of the 
student as represented by his or her essays, work experience, volunteer activities 
and recommendation letters. Some of the attributes considered in this evaluation 
are evidence of responsible borrowing, responsibility, honesty, good judgment, 
involvement and evidence of sufficient self-expression to succeed in the chosen field.  
Students who are selected to receive grants and interest-free loans for the 
first time are required to attend a one-hour orientation session at the SF’s main 
building. In this orientation, staff members of the SF explain the conditions of the 
loan, the services available to students and also hand out a check with the financial 
aid that students were awarded. In addition, since the year 2012, the SF has 
administered financial literacy surveys to students attending orientation sessions. 
                                                             
9 The EFC is calculated by the U.S. Department of Education based on information provided by the 
students in the FAFSA. For additional information, see: https://fafsa.ed.gov/help/fftoc01g.htm 
(accessed on 2/26/2014). 
10 A description of the eligibility requirements can be found at http://www.sfstl.org/financial-aid/who-
is-eligible, accessed on 2/26/2014. 
11 Note that unsubsidized loans are not considered in its calculation of financial need because the SF 
wants students to rely exclusively on grants, subsidized loans and their interest-free loan. 
9 
 
This survey includes the questions I consider to examine the extent to which 
students understand and take into consideration the financial aspects of their 
higher education. In addition, during the sample period, nearly half of the students 
were randomly selected to participate in a financial literacy workshop that provided 
education about the main financial aspects of higher education. At the end of this 
workshop, the SF also administered a second financial literacy survey to measure 
the extent to which students learned the main contents covered in the workshop. 
 
b. Descriptive Statistics 
 
Table 1 presents descriptive statistics of the sample of students who were 
first time recipients of grants and interest free loans from the SF. In Panel (a), I 
start considering socioeconomic and demographic characteristics. Overall, 63% of 
the students are female and 43% Afro-American. The average expected family 
contribution (EFC) for higher education is $2,814 and 37% of the students 
participated in preparatory programs for low income students in high school12. 
Panel (b) provides descriptive statistics about students’ current enrollment. 
Note that 73% of the students are freshmen, 77% are pursuing a bachelor degree 
and the average cost of attendance is $26,485.  
In Panel (c), I provide descriptive statistics on the academic performance of 
students in high school. The average ACT score is 23 points (68 percentile in the 
national rank), the average high school GPA is 3.4 and 71 percent of them received 
an academic recognition in high school. 
Finally, Panel (d) presents a characterization of students’ exposure to 
financial education and financial experiences. I find that 85 percent of the students 
in the sample passed a semester-long personal finance class in high school as part of 
their graduation requirements in the Missouri public education system. In addition, 
                                                             
12 Preparatory programs are conducted by non-profit organizations in St. Louis in order to help 
students to be admitted into post-secondary institutions. These programs provide training to 
improve performance in national tests, financial education and financial resources.  
10 
 
71 percent of the students who took this class passed it with an “A” grade. 43 
percent of the students passed the entrance counseling for federal loans, which is an 
online training that describes the terms and conditions related to the use of those 
loans. More than half of the students have working experience and thus have 
received income from work. Finally, nearly two thirds of the students have at least 
one other member of the family who is or has been enrolled in a post-secondary 
institution. 
 
3. Financial Literacy and Investments in Higher Education 
 
a. Level of Financial Literacy 
 
In this section, I examine the extent to which low income students are 
familiar with three main financial aspects of their higher education: expected 
income, financing costs and opportunity cost of being enrolled in a post-secondary 
institution. The data is from the financial literacy surveys administered by the SF 
during the orientations of 2012 and 2013 described above.  
The results discussed in this section are in Table 2. Note that the number of 
respondents is smaller than the number of students who received grants and loans 
because not all students attended the group orientation sessions. In addition, the 
number of respondents from the application cycle January – April 2012 is 
particularly small because the survey was only administered to students who 
participated in the financial literacy workshop. 
Expected Earnings. Panel (a) reports the fraction of students who have ever 
thought about future income. Specifically, the wording of the question I consider is: 
“Have you ever tried to determine the monthly income that you will earn within the 
first two years of graduation? (a) Yes, (b) No” I find that only one out of three 
students has ever thought about how much they will earn after graduation.  
Financing Costs. Panel (b) presents the fraction of students that correctly 
responded to the questions that measure their level of knowledge about the costs of 
11 
 
different sources of financing for their higher education. The first survey question 
examines whether students are familiar with the interest rate of federal loans. The 
question was asked to students from the three application cycles considered in this 
study. The specific wording of the question is: “Regarding federal subsidized loans 
available for the next academic year, what will be the interest rate during the 
repayment period? (Your best guess is fine)” I find that only 18 percent of the 
students provided a correct answer to this question. This result is surprising 
because students in the sample have been exposed to the cost of federal loans in at 
least two ways. First, the main purpose of completing the FAFSA is to receive 
financial aid from the Federal Government. Second, the award letter of the post-
secondary institution has a financial aid package that includes federal loans for 
most, if not all, students. 
Although students might not be familiar with the actual interest rates of 
federal loans, they can still be able to compare the costs of different sources of 
financing available to them. In order to address this possibility, the financial 
literacy survey administered in the second application cycle included a hypothetical 
question that addresses students’ cost comparison skills. The specific wording of the 
question is: “Suppose you need to raise $5,000 to finance your next academic year. In 
the following choices, assign numbers from 1 (cheapest) to 7 (most expensive) to rank 
the cost of the following alternatives: (a) Grants, (b) Unsubsidized loans from the 
Federal Government, (c) Loan from the SF, (d) Credit Card, (e) Scholarships, (f) 
Subsidized loans from the Federal Government (g) Private loans”. Overall, the 
results suggest that students are poorly informed about the relative costs of 
different sources of financing for their higher education. Indeed, only 23 percent of 
the students correctly ranked the five cheapest sources of financing available to 
them (in order): grants and scholarships, loan from the SF, subsidized loans and 
unsubsidized loans. One notable result is that 80 percent of the students said that 
grants and scholarship are the cheapest sources of financing for their higher 
education. In other words, one out of five students does not know that grants and 
12 
 
scholarships are cheaper than loans. In addition, only 58 percent of the students 
know that subsidized loans are cheaper than unsubsidized loans.  
Opportunity Costs of Enrollment. Finally, I study the extent to which 
students understand the opportunity cost of being enrolled in a post-secondary 
institution. The first survey question I use is: “Suppose your studies take one year 
longer than you expect. How much do you expect this additional year of studies will 
cost you? (Your best guess is fine)” The results in Panel (c) show that the average 
amount reported ($22,315) is slightly lower than the cost of attendance ($26,485). In 
order to determine the elements that students consider in their calculation, the 
financial literacy survey administered to students who applied in the cycle January 
– August 2013 added a follow-up question: “In the following list, please indicate the 
item(s) you considered to calculate the answer to the previous question: (a) total 
amount of tuition, (b) tuition minus grants and scholarships, (c) a year of salary, (d) 
cost of meals, (e) other (specify)” The most popular choice among students is the 
amount of tuition, with an incidence of 94 percent. However, only one out of four 
students considers as a cost the income they would forego if they need one extra 
year to earn their degree, which is arguably the largest component of the 
opportunity cost of enrollment. 
Summing up, the results of the survey suggest that students are poorly 
informed about three key financial aspects of their investments in higher education: 
expected income, financing costs and opportunity costs of being enrolled. In the next 
sub-sections, I examine how these results vary with a rich set of student 
characteristics. 
 
b. Financial Literacy and Academic Achievement in High 
School 
 
The first potential factor associated with financial literacy is academic 
performance in high school. Indeed, measures of academic achievement in high 
school such as cumulative GPA and ACT scores are highly correlated with measures 
13 
 
of general intelligence or IQ (e.g. Koenig, Frey and Detterman, 2008). In addition, 
there is a growing literature showing that higher cognitive skills are associated 
with improved financial decision making (e.g. Stango and Zinman, 2009 and 2011; 
Grinblatt, Keloharju and Linnainmaa, 2011 and 2012; Agarwal and Mazumder, 
2013). In this study, I consider four proxies for academic achievement in high 
school: ACT scores, cumulative GPA, cumulative GPA in math courses and whether 
students received any academic recognition in high school. The results are in Table 
3. I find that students with high (above the median) ACT have a slightly higher 
level of financial literacy across the three dimensions considered: expected income, 
financing costs and opportunity costs of enrollment. Cumulative GPA and math 
GPA do not have a clear association with the level of financial literacy. On the one 
hand, students with higher cumulative GPAs are slightly less likely to think about 
future earnings and financing costs but slightly more likely to consider expected 
income as a cost of taking one extra year to earn their degree. Overall, the 
association between academic achievement in high school and knowledge about 
financial aspects of higher education is small. 
 
c. Financial Literacy and Exposure to Financial Education  
 
The second potential factor associated with financial literacy is exposure to 
financial education and financial experiences. In Table 4, I find that students who 
were exposed to entrance counseling for Federal Loans are slightly more likely to 
have thought about future income but less informed about the cost of different 
sources of financing and the opportunity cost of higher education. I find that 
students who passed their personal finance class with an “A’ are slightly more likely 
to have thought about future income and be better informed about the opportunity 
cost of being enrolled in a post-secondary institution. In addition, in Table 5, I find 
that students who took a personal finance class that covered topics related to 
financing of higher education and employment perspectives are slightly better 
informed about the financial aspects of their higher education. In contrast, students 
14 
 
whose personal finance courses covered budgeting, bank accounts and credit cards 
do not present higher levels of financial literacy. Similarly, Table 6 shows that the 
level of financial knowledge does not have major differences for individuals with 
financial experiences such as working exposure and whether other members of the 
family have ever attended a post-secondary institution. Overall, the association 
between exposure to different sources of financial education and financial 
experiences with financial knowledge about the financial aspects of higher 
education is small.  
 
4. How does Financial Education affect Investments in Higher 
Education? 
 
Having established that students are poorly informed about the financial 
aspects of their higher education, I examine the extent to which financial education 
that provides information about future income, relative costs of different sources of 
financing for higher education and the opportunity cost of taking too long in college 
affects academic performance and ability to receive financial aid. Specifically, the 
first outcome of interest is the GPA that students received in their post-secondary 
institution six months after they received financial aid from the SF. There are at 
least two potential mechanisms through which a financial literacy workshop on the 
financial aspects of higher education can improve academic performance. First, the 
workshop can increase academic effort by increasing students’ awareness about 
their potential returns to education, which only a third of the students in the 
sample has ever thought about. Second, since most students neglect the opportunity 
cost of being enrolled in a post-secondary institution, the workshop can increase 
academic effort by helping them realize that they underestimate the true cost of 
non-academic activities such as leisure and paid work. 
The second outcome of interest is students’ ability to receive grants and 
interest-free loans from the SF for a second year. As discussed above, the workshop 
can increase the chances that students continue receiving financial aid from the SF 
15 
 
and other sources of merit-based aid by improving academic performance. Second, 
one of the subjects that was emphasized in the workshop is that interest-free loans 
from the SF are cheaper and have less stringent terms than other loans available to 
them. Since most students are not aware of the costs of different sources of 
financing for higher education, I expect that those who participated in the workshop 
will be more likely to submit a renewal application and also work harder to meet 
the selection criteria. Indeed, the average financial aid package for renewing 
students was $6,767 ($817 of which are from grants and $5,950 from interest-free 
loans). Raising these funds from unsubsidized federal loans, the next cheapest 
alternative source of financing available to these students, would increase their 
financing costs by about $6,000 over a 10 year repayment period. Thus, receiving 
financial aid from the SF is an economically meaningful outcome for students in the 
sample. 
 
a. Experimental Design  
 
I consider a randomized controlled trial to identify the effects of a financial 
education workshop provided to students who submitted their application to the SF 
for the first time in the cycle January – April 2012. Students in the control group 
were asked to attend one of the hour-long orientation sessions where staff members 
of the SF explained the terms of the interest-free loan and other resources available 
to them. Students in the treatment group were asked to participate in one of the 
two-hour orientation sessions. In the first hour, they received the same information 
that students in the control group. In the second hour, students in the treatment 
group participated in a financial literacy workshop that covered topics related to 
future income, costs of different sources to finance higher education and the 
opportunity costs of being enrolled in a post-secondary institution.  
Students were randomly assigned into a treatment and control group for the 
experiment. For practical reasons, the randomization was implemented over the 
group of shortlisted students, i.e. a larger group than the one that actually received 
16 
 
financial aid from the SF. Indeed, as soon as students were selected for financial 
aid, they received an award letter that included a schedule with the orientation 
session they were asked to attend. The results of the randomization for students 
who finally received financial aid from the SF are in Panel (a) of Table 8. Note that 
the randomization produced a similar sample size for the treatment and control 
groups (73 and 78 respectively). In addition, consistent with a successful 
randomization procedure, I find no systematic differences across a rich set of 
observable characteristics: socioeconomic, demographic, current enrollment, 
academic performance in high school and exposure to financial education and 
financial experiences.  
 
b. Compliance with the Treatment  
 
There are two factors that affected the compliance of students with the 
assignment to the treatment. First, 34 students did not participate in regular 
orientation sessions because they entered late into the program and they were not 
eligible for selection into sessions with and without a financial literacy workshop. At 
this stage, only one-hour orientation sessions were available. The main reason for 
the delay was that students received late acceptance letters from the post-secondary 
institution they were planning to attend. Second, time conflicts or unexpected 
circumstances prevented students from attending the orientation session they were 
asked to attend. In particular, eight students who were assigned into the treatment 
group participated in the orientation sessions of students in the control group. 
Similarly, one student assigned to the control group participated in the orientation 
session for students in the treatment group. Panel (b) of Table 8 presents the 
descriptive statistics of students who participated and did not participate in the 
financial literacy workshop.  
 
 
 
17 
 
c. Financial Literacy Workshop 
 
The financial literacy workshop was one hour long. The main topics covered 
were future income, the cost of different sources of financial aid and the opportunity 
cost enrollment. The specific contents of the workshop were developed and taught 
by staff members of the SF and the Missouri Council of Economic Education.  
The format was a traditional lecture in which instructors conducted the class 
using slides. The class started with a motivation in which instructors asked 
students whether they have ever thought about these financial aspects of their 
higher education13. Next, the instructor discussed the amount of loans from the SF 
and subsidized loans from the Federal Government that students were expected to 
take during their studies and their most likely repayment schedule. The instructor 
recalled that the SF calculated their loan and grant award in a way that, together 
with scholarships from other sources and subsidized loans from the Federal 
Government, they will have enough resources to pay for their educational expenses 
(tuition + room & board). The instructor also encouraged students not to take more 
debt than they needed and to always look for the cheapest source of funding. 
Instructors also asked students not to take too little debt because they can find 
themselves in a situation where (i) they have to rely on more costly sources of debt 
or (ii) take paid jobs that might compromise their academic performance. 
The class continued with a discussion about the costs associated with taking 
too long to earn a degree. Specifically, the instructor emphasized the work/study 
trade-off and the cost of replacing debt with paid jobs. The main message was that 
although work experiences can improve career opportunities, working too much can 
come at the cost of compromising academic performance. The instructor spent 
considerable time discussing the opportunity cost of staying too long in college, with 
particular emphasis on the income they would forego for not participating in the 
labor market, which is neglected by most students. The workshop concluded with a 
summary of the recommendations discussed in the class. After the class was ended, 
                                                             
13 During the class, most students replied “no” to this question. 
18 
 
students were asked to complete a voluntary follow-up survey to measure their 
degree of learning. 
 
d. Results 
 
The first outcome of interest is academic performance. The measure of 
performance is the GPA obtained by the student in his or her post-secondary 
institution. This information is from the transcripts that students submitted to the 
SF as part of their renewal application. The results are in Table 9, Panel (a). The 
first column presents the regression of GPA on “ITT” (intent-to-treat), a dummy 
that takes the value 1 for individuals who were initially selected into the treatment 
group and zero otherwise. I find that selection into the financial literacy workshop 
increases the first year by nearly 0.2 points. This effect is significant at the 10 
percent level and the magnitude is equivalent to one third of a standard deviation of 
the average GPA in the sample. 
The main limitation of the previous result is the presence of non-compliers in 
the data. I address this concern using an instrumental variable strategy. 
Specifically, I use the dummy ITT as an instrument for the actual participation of 
students into orientation session. By construction, ITT is a valid instrument for 
participation into the treatment because (i) ITT is uncorrelated with the outcome of 
interest through factors other than participation in the workshop and (ii) ITT 
strongly predicts participation in the workshop. Although (i) is not testable, the 
results of Panel (a) – Table 8 suggest that the randomization was successful. 
Assumption (ii) is confirmed in the first stage of the instrumental variable strategy 
reported in Column (2). As expected, the correlation between ITT and the actual 
treatment variable is large (0.84) and highly significant. The results of the second 
stage are in Column (3). I find that participation in the workshop increases the 
average college GPA by 0.2 points, from 3.0 in the control group to 3.2 in the 
treatment group. Although the magnitude of this effect is one third of a standard 
deviation of the overall GPA, the point estimates are only significant at the 15.4%, 
19 
 
probably due to the small size of the sample (N=117). However, a second wave of the 
experiment was conducted for students who applied in the cycle January – April 
2013. If the results of the experiment conducted in this cycle replicate the results 
from students who applied in the cycle January – April 2012, then the average 
treatment effects on students who participated in the workshop (the treated) will be 
statistically significant at conventional levels of significance. Since there are no 
major differences among students from both cohorts (Table 1), this is likely to be the 
case. 
The second outcome of interest is “Renew”, a dummy variable that takes the 
value one for students who received grants and interest-free loans from the SF for a 
second year. The results are in Table 9, Panel (b). The first column presents the 
regression of “Renew” on “ITT”. The point estimate is 7 percentage points and 
insignificant at conventional levels of significance. Again, I address the non-
compliance challenge with an instrumental variable strategy in which I use ITT as 
an instrumental variable for the indicator of actual participation into the program. 
In column (3), I present the results of the second stage. The point estimates suggest 
that participation in the financial literacy workshop increases by about 11 
percentage points (or 17%) the probability that students are able to receive grants 
and interest-free loans for a second year. This effect is insignificant at conventional 
significance levels. However, if the results of the experiment conducted for students 
from the cycle January – April 2013 mimic the results of the students from the cycle 
January – April 2012, then the average treatment effects of the financial literacy 
workshop on participant students would be statistically significant at conventional 
significance levels. 
 
 
 
 
 
 
20 
 
5. Discussion 
  
a. Why do students know so little about the financial aspects of 
their higher education?  
 
The results of the survey suggest that students are poorly informed about 
three key financial aspects of their investments in higher education: future income, 
financing costs and opportunity costs of being enrolled. Surprisingly, this 
phenomenon is observed in a group of academically talented students who were 
exposed to different sources of financial education and financial experiences. Why 
do these students know so little about the financial aspects of their higher 
education? I provide three potential (and non-mutually exclusive) explanations. 
The first explanation is that financial education programs available to 
students did not encourage them to think about the main financial aspects of their 
higher education. This can occur because instructors believe that (i) these contents 
will only benefit the minority of students in their school who are college bound, (ii) 
students will receive this advice through an alternative channel or (iii) are not 
aware that this is the main financial decision faced by high school students and the 
potential impact of this education on financial decision making. 
I examine the contents covered in the semester-long personal finance classes 
that students in the sample took in high school. This data is from the financial 
literacy survey administered to students who applied to the SF in the cycle January 
– April 2013, were selected to receive grants and interest-free loans and 
participated in the orientation sessions. Specifically, the survey question I consider 
is: “Please indicate what of the following topics you covered in the personal finance 
(or economics) class you took in high school: (a) credit cards, (b) savings 
accounts/debit cards, (c) budgeting, (d) alternatives to pay for higher education, (e) 
federal loans, (f) employment and income perspectives.” I find that few students 
recall having covered topics related with the financial aspects of their investments 
in higher education. Indeed, Table 5 shows that only 34% of the students covered 
21 
 
alternatives to pay for higher education, 36% studied federal loans and 53% studied 
employment and income perspectives. Only 20% of the students covered these three 
topics during their personal finance or economics class. Overall, the results are 
consistent with the idea that most personal finance classes in high school do not 
induce students to perform a cost-benefit analysis of their investments in higher 
education. 
A second potential explanation is that students were prompted to think about 
the financial aspects of their higher education but have a limited ability to recall. If 
financial aspects of higher education were not emphasized enough or in the right 
way, or were not considered in assignments or tests, then it is less likely that 
students will recall, which is also consistent with the survey data. A similar result 
can arise if students have a low ability to retain. This can occur because students 
only prepare these topics to perform well in tests but not to evaluate their own 
career choices. 
A third possibility is that students do not evaluate the financial costs and 
benefits associated with their higher education because vocational and other non-
pecuniary considerations outweigh the financial considerations of their career 
choices. Indeed, for many students, the non-pecuniary benefits of higher education 
can be as large as pecuniary benefits (Oreopoulos and Salvanes, 2011). In addition, 
there is growing evidence suggesting that non-academic factors (such as sports) can 
have a large impact on student application decisions. For instance, Pope and Pope 
(2014) find that a school that has a stellar year in basketball or football on average 
receives up to 10% more SAT scores.  
 
b. Impact of the Financial Literacy Workshop 
 
Overall, the evidence on the impacts of the workshop is inconclusive due to 
the small sample size of the first round of the experiment. If the results of the 
second cohort of students who participated in this experiment were the same than 
those from those who participated in the first round, the effects would be significant 
22 
 
at conventional levels. Since the experimental conditions of both cohorts of students 
are similar, in terms of students’ observable characteristics and exposure to the 
workshop, there is a high chance to observe significant effects with a larger sample 
size.  
If the analysis of a larger sample confirmed these effects, one question that 
arises is: how can one hour of financial education have such large effects on 
academic performance and the ability to receive financial aid? This is particularly 
relevant because students in the sample have already been exposed to different 
sources of financial education and several studies show that financial education has 
minor effects on financial literacy and financial behavior (Fernandes, Lynch and 
Netemeyer, forthcoming)14. There are two main set of factors that can explain 
positive and significant effects of the workshop: (i) contents and (ii) characteristics 
and circumstances of participant students. In order to illustrate this point, I 
examine the way in which this workshop and circumstances of the participant 
address the main barriers to financial education programs identified in the 
literature (e.g. Willis, 2010; Fernandes, Lynch and Netemeyer, forthcoming).  
The first barrier to financial education is that many individuals have limited 
capabilities to perform basic math tasks and to retain knowledge, which are 
necessary skills to understand and evaluate financial choices. In this experiment, 
most students in the sample are able to perform the basic math operations that are 
necessary to understand the main financial aspects of higher education discussed in 
the workshop. Similarly, students’ ability to retain knowledge is strengthened with 
a financial education program specifically designed to connect the contents to the 
specific circumstances that they face. 
Second, there is a gap between the time in which financial education is 
provided and the timing of financial choices related to this education. In this 
context, decreasing ability to retain knowledge and a changing marketplace reduce 
                                                             
14 Fernandes, Lynch and Netemeyer (forthcoming) conduct a meta-analysis of the effect of financial 
literacy on financial behavior of more than 200 papers. Their main finding is that financial education 
has a minor role for financial literacy and financial decision making. 
23 
 
the potential impact of financial education programs on financial decision making. 
In the workshop studied in this paper, this problem is mitigated because most of the 
education focused the costs and benefits of two actions that students have to make 
decisions on shortly after participating in the workshop: use of time and borrowing. 
Third, the heterogeneity of individual preferences and circumstances reduce 
the ability of financial literacy programs to provide advice that is useful for 
everyone. Similarly, since the link between financial decisions and individual well-
being is not straightforward, it is unclear that financial education will induce 
individuals to make similar financial choices during a specific time frame. In the 
context of the workshop, the education provided is relevant because (i) students 
have to make choices in terms of use of time and use of credit, (ii) the economic 
consequences of these choices are large and (iii) students were not fully aware of the 
consequences of their choices. In addition, the information and many of the 
recommendations provided during the workshop promote desirable behavior 
regardless of student preferences and personal circumstances15.  
Another potential concern is that financial institutions could outmaneuver 
financial education and lead consumer into bad financial choices. This is an unlikely 
barrier for the program studied in this paper because it was provided to a small and 
disperse group of students.  
 
6. Conclusion 
 
Higher education is a key investment opportunity for young individuals. Yet, 
there is little known about the extent to which students understand and take into 
consideration the main financial aspects of this decision. Using rich administrative 
and survey data from a large U.S. non-profit organization, I find that students are 
                                                             
15 For instance, a large portion of the workshop focused on encouraging students to look for the 
cheapest source of financing for higher education (grants and scholarships, loans from the SF and 
subsidized loans from the Federal Government). A second major component of the workshop aimed 
at helped students to understand the opportunity cost of taking too long in college, which is 
especially useful because most students neglect the fact that the income they would forego is a major 
cost for taking too long in earning a degree. 
24 
 
poorly informed about three main financial aspects of their higher education: future 
income, financing costs and opportunity cost of enrollment. Indeed, only one out of 
three students in the sample had ever tried to determine their income within two 
years after earning a degree; one out of four students correctly ranked the costs of 
major sources of funding available to them; and, one out of four students claimed to 
consider as a cost the income they would forego if they need one extra year to earn 
their degree. This result is surprising because students in the sample are 
academically accomplished (high GPA and ACT scores), were exposed to financial 
education (semester-long personal finance class) and had real financial experiences 
(paid jobs and applications for financial aid). 
I also examine the extent to which financial education that is focused on 
future income, costs of different sources of financing and the opportunity cost of 
enrollment affects students’ academic performance and ability to receive financial 
aid. Using data from the first round of implementation of a randomized field 
experiment, I find that students who participated in an hour-long financial literacy 
workshop received 0.2 points higher GPA in their post-secondary institution than 
the control group (3.2 versus 3.0). This difference has a p-value of 15% with a 
sample size of 117 students. In addition, I find that students who participated in the 
workshop were 11 percentage points more likely to receive financial aid from the 
non-profit organization than the control group, with a p-value of 0.25. Overall, these 
results suggest that financial education that focuses on financial aspects of higher 
education could improve students’ academic achievement and their ability to receive 
financial aid. 
 
 
 
 
 
 
 
25 
 
7. References 
 
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Decision Making, American Economic Journal: Applied Economics, 5(1): 193–
207 
Avery, Christopher and Sarah Turner, 2012, Student Loans: Do College Students 
Borrow Too Much—Or Not Enough?, Journal of Economic Perspectives, 26(1): 
165–192  
Behrman, Jere, Olivia Mitchell, Cindy Soo and David Bravo, 2012, How Financial 
Literacy Affects Household Wealth Accumulation, American Economic Review: 
Papers & Proceedings, 102(3): 300–304  
Bertrand, Marianne, and Adair Morse, 2011, Information Disclosure, Cognitive 
Biases and Payday Borrowing, Journal of Finance, 66(6), 1865-1893.  
Bettinger, Eric, Bridget Long, Philip Oreopoulos and Lisa Sanbonmatsu, 2012, The 
role of simplification and information in college decisions: results from the H&R 
block FAFSA experiment, Quarterly Journal of Economics, 127 (3): 1057-1106.  
Cadena, Brian and Benjamin Keys, 2013, Can Self-Control Explain Avoiding Free 
Money? Evidence from Interest-Free Student Loans, Review of Economics and 
Statistics, 95 (4): 1117-1129. 
Campbell, John, 2006, Household Finance, Journal of Finance, 61 (4): 1553–1604  
Carlin, Bruce and David Robinson, 2012, Financial Education and Timely Decision 
Support: Lessons from Junior Achievement, American Economic Review: Papers 
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Cole, Shawn and Bilal Zia, 2011, Prices or Knowledge? What Drives Demand for 
Financial Services in Emerging Markets?, Journal of Finance, 66 (6), 1933-1967  
Cole, Shawn, Anna Paulson and Kartini Shastry, forthcoming, Smart money: The 
Effect of Education on Financial Outcomes, Review of Financial Studies.  
Cole, Shawn, Anna Paulson and Kartini Shastry, 2013, High School and Financial 
Outcomes: The Impact of Mandated Personal Finance and Mathematics 
Courses, working paper. 
26 
 
Council for Economic Education, 2014, Survey of the States: Economic, Personal 
Finance & Entrepreneurship Education in Our Nation’s Schools in 2009, 
www.councilforeconed.org, accessed 03/11/2014.  
Fernandes, Daniel, John G. Lynch Jr. and Richard G. Netemeyer, forthcoming, 
Financial Literacy, Financial Education, and Downstream Financial Behaviors, 
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Grinblatt M., Keloharju M. and J. Linnainmaa, 2011, IQ and Stock Market 
Participation. The Journal of Finance, 66 (6), pp 2119-2164. 
Grinblatt M., Keloharju M. and J. Linnainmaa, 2012, IQ, Trading Behavior, and 
Performance. Journal of Financial Economics, 104 (2), pp 339-362. 
Koenig, Katherine, Frey, Meredith and Douglas Detterman, 2008, ACT and general 
cognitive ability, Intelligence 36, 153–160 
Lusardi, A., and P. Tufano, 2009, Debt Literacy, Financial Experiences and 
Overindebtedness. NBER Working Paper 14808.  
Lusardi, Annamaria, and Olivia S. Mitchell, 2006, Financial literacy and planning: 
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Lusardi, Annamaria, and Olivia S. Mitchell, 2007, Financial literacy and retirement 
preparedness: Evidence and implications for financial education, Business 
Economics 42, 35–44.  
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of Monetary Economics 54, 205–224.  
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among the Young.” Journal of Consumer Affairs 44 (2): 358–80.  
Lyons, Angela, and Urvi Neelakantan, 2008, Potential and pitfalls of applying 
theory to the practice of financial education, Journal of Consumer Affairs 42, 
106–112.  
Mandell, Lewis, 2007, Financial Education in High School, in Annamaria Lusardi 
ed.: Overcoming the Saving Slump: How to Increase the Effectiveness of 
Financial Education and Saving Programs (SUNY-Buffalo Press). 
27 
 
Oreopoulos, P. and Salvanes, K.G., 2011. Priceless: The Nonpecuniary Benefits of 
Schooling, Journal of Economic Perspectives, 25 (1), 159–184. 
Stango, Victor, and Jonathan Zinman, 2009, Exponential growth bias and 
household finance, Journal of Finance 64, 2807–2849. 
Stango, Victor, and Jonathan Zinman, 2011, Fuzzy math, disclosure regulation, and 
credit market outcomes: Evidence from Truth-in-Lending reform, Review of 
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Papers and Proceedings, 101 (3), 429–434. 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
28 
 
Tables 
Table 1 
Descriptive Statistics 
 
Panels (a) – (e) present average characteristics of students who received grants and 
interest-free loans from the Scholarship Foundation of St. Louis. The application cycles 
considered are: January – April 2012, August – November 2012 and January – April 2013. 
The description of variables is in section 3(a). 
 
 
 
Jan - Apr 
2012
Aug - Nov 
2012
Jan - Apr 
2013
All
Number of grant and loan recipients 153 41 132 326
(a) Socioeconomic and Demographic Characteristics
Female 0.61 0.80 0.61 0.63
African-American 0.39 0.61 0.41 0.43
EFC ($1,000) 2.71 2.51 3.03 2.81
Preparatory Program 0.37 0.46 0.34 0.37
(b) Current Enrollment
Freshmen 0.76 0.41 0.80 0.73
Bachelor degree 0.75 0.85 0.77 0.77
Cost of Attendance ($1,000) 25.5 20.9 29.4 26.5
(c) Academic Performance in High School
ACT score 23 22 23 23
HS GPA 3.45 3.30 3.44 3.43
HS Math GPA 3.05 2.91 3.05 3.04
Received any recognition 0.67 0.63 0.77 0.71
(d) Financial Education and Experience
Personal Finance in HS 0.85 0.88 0.85 0.85
Grade n Personal Finance 3.63 3.62 3.68 3.65
Grade = A in Personal Finance 0.72 0.71 0.71 0.71
Entrance Counseling for Federal Loans 0.40 0.84 0.37 0.43
Working Experience 0.55 0.78 0.56 0.58
First member of the family who attends 
a post-secondary institution
0.32 0.37 0.37 0.35
Application Cycle
29 
 
Table 2 
Financial Literacy 
Panels (a) – (c) present the fraction of students that correctly answered financial literacy 
questions about the financial aspects of higher education. Note that the number of 
respondents to the financial literacy survey is smaller than the number of students who 
received grants and loans because not all students attended the group orientation sessions. 
The number of respondents for the application cycle January – April 2012 is particularly 
small because the financial literacy survey was only administered to students who 
participated in the workshop. 
 
 
Jan - Apr 
2012
Aug - Nov 
2012
Jan - Apr 
2013
All
Number of respondents 47 19 107 173
(a) Expected Income
Has ever thought about future income . 0.40 0.32 0.33
(b) Costs of Financing
Knows the interest rate for federal subsidized loans. 0.13 0.15 0.24 0.20
Correctly ranks the costs of the following financing 
sources: grants, scholarships, loans from the 
Scholarship Foundation, subsidized and unsubsidized 
loans from the Federal Government, credit cards and 
private loans.
. . 0.23 0.23
Scholarships and grants are the cheapest source of 
financing.
. . 0.79 0.79
The three cheapest sources of financing are (in 
order): scholarships, grants and loans from the 
Scholarship Foundation.
. . 0.74 0.74
Federal subsidized loans are cheaper than 
unsubsidized loans.
. . 0.58 0.58
The four cheapest sources of financing are (in 
order): scholarships, grants, loans from the 
Scholarship Foundation and subsidized loans from 
the Federal Government.
. . 0.36 0.36
(c) Opportunity Cost of Enrollment
Cost of staying one extra year enrolled in a post-
secondary institution
32.13 11.18 19.98 22.31
Tuition is one of the costs of being one extra year in 
college.
. . 0.93 0.93
Foregone income is one cost of staying one extra year 
in college
. . 0.25 0.25
Application Cycle
30 
 
Table 3 
Financial Literacy and Academic Achievement in High School 
This table presents the fraction of students that correctly answered to the financial literacy 
questions according to their academic achievement. The cutoffs represent the median value 
of ACT, GPA and math GPA in high school respectively. The specific wording of the 
financial literacy questions is in section 3(a). 
 
 
 
 
 
ACT<23 ACT>23 GPA<3.5 GPA>3.5
Math 
GPA<3.0
Math 
GPA>3.0
(a) Expected Income
Has ever thought about future income 0.28 0.39 0.38 0.27 0.37 0.26
(b) Costs of Financing
knows the interest rate for federal 
subsidized loans.
0.18 0.24 0.17 0.24 0.19 0.21
Correctly ranks the costs of the following 
financing sources: grants, scholarships, 
loans from the Scholarship Foundation, 
subsidized and unsubsidized loans from 
the Federal Government, credit cards 
and private loans.
0.19 0.29 0.27 0.21 0.32 0.16
Scholarships and grants are the 
cheapest source of financing.
0.75 0.84 0.80 0.79 0.82 0.73
The three cheapest sources of financing 
are (in order): scholarships, grants and 
loans from the Scholarship Foundation.
0.68 0.82 0.73 0.74 0.77 0.68
Federal subsidized loans are cheaper 
than unsubsidized loans.
0.58 0.55 0.57 0.59 0.59 0.57
The four cheapest sources of financing 
are (in order): scholarships, grants, 
loans from the Scholarship Foundation 
nd subsidized loans from the Federal 
Government.
0.32 0.43 0.37 0.36 0.43 0.32
(c) Opportunity Cost of Enrollment
Foregone income is one cost of staying 
one extra year in college
0.25 0.27 0.20 0.29 0.18 0.30
31 
 
Table 4 
Financial Literacy and Financial Education 
This table presents the fraction of students that correctly answered the financial literacy 
questions according to their exposure to the entrance counseling for federal loans and their 
performance in the mandatory personal finance class they took in high school. The specific 
wording of the financial literacy questions is in section 3(a). 
 
 
 
 
 
 
No Yes No Yes
(a) Expected Income
Has ever thought about future income 0.28 0.40 0.28 0.32
(b) Costs of Financing
knows the interest rate for federal 
subsidized loans.
0.20 0.21 0.19 0.22
Correctly ranks the costs of the following 
financing sources: grants, scholarships, 
loans from the Scholarship Foundation, 
subsidized and unsubsidized loans from 
the Federal Government, credit cards 
and private loans.
0.24 0.22 0.26 0.25
Scholarships and grants are the 
cheapest source of financing.
0.79 0.80 0.83 0.79
The three cheapest sources of financing 
are (in order): scholarships, grants and 
loans from the Scholarship Foundation.
0.73 0.76 0.70 0.77
Federal subsidized loans are cheaper 
than unsubsidized loans.
0.61 0.54 0.61 0.61
The four cheapest sources of financing 
are (in order): scholarships, grants, 
loans from the Scholarship Foundation 
and subsidized loans from the Federal 
Gover ment.
0.38 0.34 0.35 0.41
(c) Opportunity Cost of Enrollment
Foregone income is one cost of staying 
one extra year in college
0.29 0.20 0.17 0.25
Entrance counseling for 
Federal Loans
Passed Personal Finance 
Class with an "A"
32 
 
Table 5 
Financial Literacy and Contents Covered in the Personal Finance Class 
This table presents the fraction of students that correctly answered the financial literacy 
according to their exposure to specific topics in the personal finance class they took in high 
school. The specific wording of the financial literacy questions is in section 3(a). 
 
 
 
No Yes No Yes No Yes
Number of Respondents 24 82 13 93 15 91
% 0.23 0.77 0.12 0.88 0.14 0.86
(a) Expected Income
Has ever thought about future income 0.42 0.29 0.54 0.29 0.47 0.30
(b) Costs of Financing
knows the interest rate for federal 
subsidized loans.
0.25 0.24 0.31 0.24 0.27 0.24
Correctly ranks the costs of the following 
financing sources: grants, scholarships, 
loans from the Scholarship Foundation, 
subsidized and unsubsidized loans from 
the Federal Government, credit cards 
and private loans.
0.17 0.24 0.15 0.24 0.20 0.23
Scholarships and grants are the 
cheapest source of financing.
0.63 0.84 0.54 0.83 0.67 0.81
The three cheapest sources of financing 
are (in order): scholarships, grants and 
loans from the Scholarship Foundation.
0.63 0.77 0.54 0.76 0.67 0.75
Federal subsidized loans are cheaper 
than unsubsidized loans.
0.50 0.60 0.46 0.59 0.47 0.59
The four cheapest sources of financing 
are (in order): scholarships, grants, 
loans from the Scholarship Foundation 
and subsidized loans from the Federal 
G vernment.
0.29 0.38 0.23 0.38 0.33 0.36
(c) Opportunity Cost of Enrollment
Foregone income is one cost of staying 
one extra year in college
0.38 0.21 0.31 0.24 0.13 0.26
Credit Cards Bank Accounts Budgeting
33 
 
Table 5 (Continued) 
Financial Literacy and Contents Covered in the Personal Finance Class 
This table presents the fraction of students that correctly answered the financial literacy 
according to their exposure to specific topics in the personal finance class they took in high 
school. The specific wording of the financial literacy questions is in section 3(a). 
 
 
No Yes No Yes No Yes
Observations 70 36 49 57 67 39
% 0.66 0.34 0.46 0.54 0.63 0.37
(a) Expected Income
Has ever thought about future income 0.29 0.39 0.29 0.35 0.31 0.33
(b) Costs of Financing
knows the interest rate for federal 
subsidized loans.
0.23 0.28 0.20 0.28 0.24 0.26
Correctly ranks the costs of the following 
financing sources: grants, scholarships, 
loans from the Scholarship Foundation, 
subsidized and unsubsidized loans from 
the Federal Government, credit cards 
and private loans.
0.21 0.25 0.18 0.26 0.21 0.26
Scholarships and grants are the 
cheapest source of financing.
0.77 0.83 0.73 0.84 0.79 0.79
The three cheapest sources of financing 
are (in order): scholarships, grants and 
loans from the Scholarship Foundation.
0.73 0.75 0.67 0.79 0.78 0.67
Federal subsidized loans are cheaper 
than unsubsidized loans.
0.54 0.64 0.59 0.56 0.54 0.64
The four cheapest sources of financing 
are (in order): scholarships, grants, 
loans from the Scholarship Foundation 
and subsidized loans from the Federal 
Government.
0.36 0.36 0.35 0.37 0.36 0.36
(c) Opportunity Cost of Enrollment
Foregone income is one cost of staying 
one extra year in college
0.23 0.28 0.22 0.26 0.28 0.18
Financing of 
Higher 
Education
Federal Loans
Employment 
Perspectives
34 
 
Table 6 
Financial Literacy and Financial Experiences 
This table presents the fraction of students that correctly answered the financial literacy 
questions according to their exposure to two different financial experiences: work and 
having a member of the family who has ever attended a post-secondary institution. The 
specific wording of the financial literacy questions is in section 3(a). 
 
 
 
 
No Yes No Yes
(a) Expected Income
Has ever thought about future income 0.27 0.37 0.36 0.29
(b) Costs of Financing
knows the interest rate for federal 
subsidized loans.
0.19 0.21 0.18 0.24
Correctly ranks the costs of the following 
financing sources: grants, scholarships, 
loans from the Scholarship Foundation, 
subsidized and unsubsidized loans from 
the Federal Government, credit cards 
and private loans.
0.30 0.18 0.23 0.24
Scholarships and grants are the 
cheapest source of financing.
0.83 0.77 0.78 0.81
The three cheapest sources of financing 
are (in order): scholarships, grants and 
loans from the Scholarship Foundation.
0.76 0.72 0.74 0.74
Federal subsidized loans are cheaper 
than unsubsidized loans.
0.65 0.52 0.43 0.81
The four cheapest sources of financing 
are (in order): scholarships, grants, 
loans from the Scholarship Foundation 
and subsidized loans from the Federal 
Government.
0.46 0.30 0.32 0.43
(c) Opportunity Cost of Enrollment
Foregone income is one cost of staying 
one extra year in college
0.28 0.23 0.23 0.29
Work Experience
First member of the family 
who attends a post-secondary 
institution
35 
 
Table 7 
Financial Literacy, Socioeconomic and Demographic Background 
This table presents the fraction of students that correctly answered the financial literacy 
questions according to their socioeconomic and demographic background. The specific 
wording of the financial literacy questions is in section 3(a). 
 
 
 
 
No Yes No Yes No Yes
(a) Expected Income
Has ever thought about future income 0.43 0.28 0.43 0.22 0.39 0.31
(b) Costs of Financing
knows the interest rate for federal 
subsidized loans.
0.14 0.24 0.27 0.12 0.19 0.21
Correctly ranks the costs of the following 
financing sources: grants, scholarships, 
loans from the Scholarship Foundation, 
subsidized and unsubsidized loans from 
the Federal Government, credit cards 
and private loans.
0.30 0.19 0.25 0.23 0.28 0.22
Scholarships and grants are the 
cheapest source of financing.
0.85 0.76 0.79 0.82 0.92 0.76
The three cheapest sources of financing 
are (in order): scholarships, grants and 
loans from the Scholarship Foundation.
0.83 0.69 0.77 0.72 0.84 0.71
Federal subsidized loans are cheaper 
than unsubsidized loans.
0.55 0.60 0.52 0.69 0.60 0.57
The four cheapest sources of financing 
are (in order): scholarships, grants, 
loans from the Scholarship Foundation 
and subsidized loans from the Federal 
Government.
0.45 0.31 0.37 0.38 0.40 0.35
(c) Opportunity Cost of Enrollment
Foregone income is one cost of staying 
one extra year in college
0.23 0.27 0.31 0.23 0.24 0.26
Female Afro-American Freshman
36 
 
Table 8 
Randomization 
This table presents the results of the randomization. The results of the randomization for 
students who received financial aid from the SF are in Panel (a). Panel (b) presents the 
descriptive statistics of students who participated and did not participate in the financial 
literacy workshop. The description of variables is in section 3(a).  
 
 
 
 
 
C T T - C C T T - C
Sample size 78 73 68 49
Socioeconomic and Demographic Characteristics
Female 0.64 0.55 -0.09 0.63 0.55 -0.08
African-American 0.37 0.41 0.04 0.40 0.44 0.04
EFC ($1,000) 2.68 2.84 0.16 2.49 3.69 1.20
Preparatory Program 0.35 0.40 0.05 0.38 0.43 0.05
Current Enrollment
Freshmen 0.77 0.77 0.00 0.74 0.86 0.12*
Bachelor degree 0.76 0.73 -0.03 0.76 0.76 -0.01
Cost of Attendance ($1,000) 25.60 25.62 0.02 25.85 26.06 0.21
Academic Performance in High School
ACT score 22.47 23.20 0.73 22.76 23.19 0.43
HS GPA 3.45 3.46 0.01 3.45 3.47 0.02
HS Math GPA 3.01 3.07 0.06 2.98 3.10 0.12
Received any recognition 0.69 0.67 -0.02 0.71 0.67 -0.03
Financial Education and Experience
Personal Finance in HS 0.90 0.81 -0.10 0.88 0.83 -0.05
Grade in Personal Finance 3.66 3.64 -0.02 3.65 3.67 0.02
Grade = A in Personal Finance 0.73 0.74 0.01 0.71 0.75 0.04
Working Experience 0.55 0.56 0.01 0.51 0.63 0.12
First member of the family who attends a post-
secondary institution
0.35 0.29 -0.06 0.31 0.27 -0.04
Intent to Treat Compliance
Panel (a) Panel (b)
37 
 
Table 9 
Impact Evaluation of Financial Literacy Workshop 
This table presents the incidence of correct responses for students with different 
socioeconomic and demographic background. The specific wording of the financial literacy 
questions is in section 3(a). 
 
Panel (a) 
 
 
Panel (b) 
 
 
 
(1) (2) (3)
GPA Treatment GPA
(OLS) (IV-First stage) IV-Second stage
Inte t to treat 0.185* 0.841***
(0.087) (0.000)
Treatment 0.207
(0.154)
Constant 3.000*** 0.016 2.990***
(0.000) (0.320) (0.000)
Observations 128 117 106
R-squared 0.023 0.725 0.000
(1) (2) (3)
Renew=1 Treatment Renew=1
(OLS) (IV-First stage) IV-Second stage
Int nt to treat 0.072 0.84 ***
( 341) ( 000)
Treatment 0.114
(0.250)
Constant 0.654*** 0.016 0.670***
(0.000) (0.320) (0.000)
Observations 151 117 117
R-squared 0.006 0.725 0.000