Financial Literacy Education and Foreclosure Rates

We examine the impact of state-mandated financial literacy education on foreclosure rates in the United States. Amid growing concerns about consumer debt and financial instability, many states have introduced high school financial education requirements to enhance long-term financial decision-making and reduce household financial distress. Using a difference-in-differences design, this research evaluates policy effects by focusing on 11 U.S. states selected for their relative size or the severity of the impact they experienced during the 2008 mortgage crisis. These states offer a relevant context for assessing whether financial literacy mandates can mitigate large-scale financial vulnerability. We compare states that implemented such mandates to those that did not, while controlling for socioeconomic, temporal, and housing market variables to isolate the policy’s effect.Our findings indicate that mandated financial literacy education is associated with reduced foreclosure rates. These results suggest that early, structured financial education that is delivered through the public school system can promote more responsible financial management, judicious borrowing behavior and financial resilience. We suggest that equipping young individuals with foundational financial skills prepares them to weather financial challenges and economic shocks. Our study contributes to the growing literature on the economic benefits of financial literacy and offers policy-relevant insights for strengthening household financial stability.