Dr. Sara Goldrick-Rab
The report, published by Education Northwest researchers Drs. Annie Hemphill, Sam Riggs, Sara Goldrick-Rab, and Taylor Burtch, analyzed nationally representative data from the National Postsecondary Student Aid Survey to determine whether financial knowledge could reduce basic needs insecurity.
According to the study, approximately 26 percent of undergraduate students experienced basic needs insecurity, characterized by a lack of consistent access to food, housing, and other essentials. While initial analysis showed students with strong financial knowledge had lower rates of basic needs insecurity, this relationship substantially weakened when researchers accounted for demographic characteristics, institutional context, and socioeconomic factors.
"This study examined whether increasing college students' financial knowledge could reduce basic needs insecurity. We studied that question because it's a popular approach, and it's certainly the case that students with greater financial knowledge on the 'Big Three' topics (interest, inflation, and risk diversification) have lower rates of food insecurity and homelessness in college," said Goldrick-Rab. "However, we learned that the relationship between the two very likely isn't causal, and there are probably more cost-effective ways to help students, including by helping them access public benefits and other material supports."
The findings revealed significant disparities in both financial knowledge and basic needs insecurity. Black, Native Hawaiian/Pacific Islander, American Indian/Alaska Native, multiracial, and Latino/a/x students experienced higher rates of basic needs insecurity compared to white and Asian peers. Similar patterns emerged for students identifying as genderqueer, gender nonconforming, first-generation, and student parents.
The study found that after controlling for student characteristics, the relationship between financial knowledge and basic needs insecurity diminished by nearly 70 percent, suggesting that financial knowledge alone does not address underlying structural factors contributing to basic needs insecurity.
Particularly concerning was the finding that increased financial knowledge showed little benefit for the most vulnerable student populations. The study found no evidence that addressing financial knowledge would reduce inequities in basic needs insecurity, as there was minimal variation in the relationship between financial knowledge and basic needs insecurity based on institutional type, student gender, race/ethnicity, or wealth.
The report recommends alternative approaches for postsecondary institutions, including improving students' access to public benefits programs, reducing administrative burdens for support services, and providing direct material assistance, particularly with housing.
"At a time when resources are increasingly scarce, I think it's critical that basic needs staff have science to guide their decisions," Goldrick-Rab said.
The study concludes that while financial education shouldn't be abandoned entirely, institutions might see better outcomes by directing resources toward connecting students with direct material support and addressing systemic barriers to financial stability. The research was funded by the National Endowment for Financial Education (NEFE).
