What is Financial Literacy?
Financial literacy is a lifelong journey. Three components of financial literacy are budgeting, borrowing, and repayment. The ability for postsecondary students to use knowledge and skills to make good decisions related to budgeting, borrowing, and loan repayment strategies is critical. Financial literacy is the ability to understand and effectively use various financial skills. It is the foundation of your relationship with money. There are many helpful resources to improve your knowledge.
Three Components to Financial Literacy
A budget is a compass that enables a person to stay on the path to reach financial goals. Budgeting and goal-setting are powerful exercises that make it easier to plan for personal savings. Budgeting can be a stress reliever, it gives a person control, and helps to build decision-making skills. It also can help to avoid debt, improve credit, and live within means.
Student borrowers should understand the general terminology of the student loan process and gain some basic understanding of the related concepts listed below:
- Loan types – federal vs. private
- Subsidized vs. Unsubsidized loans
- Determining how much to borrow
- Borrowing and credit
- How current borrowing affects future credit
- Impacts on credit score
Repayment of education loans kicks in once a student drops below half-time attendance or graduates from college. Student borrowers should understand the following concepts:
- Repayment plan options beyond the standard repayment plan, such as Income-Based Repayment and Pay-As-You-Earn
- How a loan grace period works
- The name and contact information of loan servicer(s)
- The role of the loan servicer(s)
Financial Literacy Resources
U.S. Department of Education Resources
- National Student Loan Data System (Houses federal student loan information)