Currently, people with language 3 or above are literate in that language, while 2 and below are illiterate. However, it's entirely possible to have a spoken mastery of a language without being able to read or write, and the opposite is also true: by way of example, I'd classify myself as having the skill level "Spanish 1": sit me down across the table from a Spaniard and I can fumble my way through a conversation, yet I can read and write Spanish. Fluency =! literacy.
Thus, I propose the following system for literacy: Levels in a language grants you NO ability to read or write on their own. In order to be literate, you must take at least one bonus dice in the "Literacy" specialty for that language. Each additional bonus die in the literacy specialty grants you improved reading/writing ability:
Literacy
1B- You can read and write the language in question, but slowly. Your penmanship is childish, and you are prone to spelling errors.
Read: 1 page in eight minutes.
Write: 1 page in sixteen minutes.
2B- You can read at about the same speed at which you speak, and write at half speed. Your penmanship is primitive but largely correct, and your errors are less common.
Read: 1 page in four minutes.
Write: 1 page in eight minutes.
3B- You write at about the same speed at which you speak, and read twice as quickly. Your penmanship is good, and errors are rare.
Read: 1 page in two minutes.
Write: 1 page in four minutes.
4B- Your penmanship is excellent, and you almost never make errors
Read: 1 page per minute.
Write: 1 page in 2 minutes.
5B- You no longer make errors when you write, and your penmanship is flawless.
Read: 2 pages per minute.
Write: 1 page per minute.
6B- You penmanship approaches fine art.
Read: 4 pages per minute.
Write: 2 pages per minute.
7B- Your penmanship knows few equals: books you transcribe are sought after by collectors.
Read: 8 pages per minute.
Write: 4 pages per minute.
Effects: Basic literacy is "cheaper" in terms of character creation, costing only 10 exp instead of 30. However, this buys you a rather crude, "Kindergarten" variety of literacy, sounding out words and writing laughably simple sentences with backwards letters and such. Literacy 2B is what we expect 10-year-olds to have mastered; only at Literacy 3B (which of course requires Language 3) does one obtain something approaching what our world considers an adult reading/writing level. Later on you get into speed-reading and the sort of writing prowess attributed to middle-age monks, if your character wants those sorts of skills.

