Increasing Financial Literacy Can Help Economy: Bernanke
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Promoting financial literacy among citizens can help improve the financial health of individuals as well as stabilize the national economy, said Federal Reserve Chairman Ben Bernanke.
Speaking at a town hall meeting with teachers in Washington on Tuesday, Bernanke said students who learn the basic principles of financial planning are more likely to save more later on in life, allowing them to weather economic and market downturns.
Promoting financial literacy among citizens can help improve the financial health of individuals as well as stabilize the national economy, said Federal Reserve Chairman Ben Bernanke.
Speaking at a town hall meeting with teachers in Washington on Tuesday, Bernanke said students who learn the basic principles of financial planning are more likely to save more later on in life, allowing them to weather economic and market downturns.
Explaining the broader effect on national economy, he said:
[quote] As the recent financial crisis illustrates, consumers who can make informed decisions about financial products and services not only serve their own best interest, but, collectively, they also help to promote broader economic stability. [/quote]
Similarly, he warned students of the need to be careful when investing in their education.
According to Bernanke, “the topic of student loan debt and whether students are prepared to service that debt upon graduation has received increased attention lately,” and “students with some exposure to economic thinking will be more likely to conceptualise their spending on postsecondary education as an investment in their own human capital and choose their school, course of study, means of paying for their education, and profession with that thought in mind.”
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Student loan debt has increased steadily since the Great Recession, surpassing total credit card debt and totalled more than $900 billion in March, according to official figures from the Fed.
Instead, the Consumer Financial Protection Bureau estimates the total student debt amount to be at $1 trillion.
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However, he said the record high student debt loan does not put the financial system at risk the way subprime mortgages did because most educational borrowing is backed by the government.
Approximately 15 percent of student loans are held by private lenders including banks while the rest is backed by the government.
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