DC Accepted Papers Paper:
The Relationship between Exposure to Financial Education and Usage of Payday Loans
*Names in bold indicate Presenter
Annually, approximately 12 million Americans use payday loans, which are short-term, high-interest loans that frequently trap low-income borrowers in cyclical debt. Payday loans are often predatory in nature, and policymakers in the United States have expressed growing interest in improving citizens’ financial decision-making capabilities. In 2003, the U.S. Department of the Treasury established the Financial Literacy and Education Commission (FLEC) to set national guidelines for addressing national financial literacy shortcomings with the goal of educating the public to better manage its personal finances. This paper examines the extent to which provision of financial education reduces individuals’ usage of payday lending. Using individual-level data from the Financial Industry Regulatory Authority’s 2018 National Financial Capability Study, I expect to find that completing a financial education program is negatively associated with reliance on payday lending.
