You'll find some disagreement among historians. I hesitate in using the word literacy because the word carries connotations that don't apply in this time period. Being educated did not mean being literate as in knowing how to read and write. Educated people knew poetry, geneology, and stories of various tribes. A few people did know how to read and write but it was not common. It also did not indicate status, a slave might read and write while his owner can't. Anyway, I find it most likely that he could not read/write except maybe his name. There's little other than speculation beyond that. Also, I don't know of any reason why he would have received any type of education after marriage. The concept of formal education didn't exist and if anything, his marriage ended his need to be a traveling merchant.

One thing to bear in mind is that we know very, very little of Muhammad outside of the early Arabic historical tradition - in particular, the genre of prophetic biography called sira. It's impossible for us to say for certain, as we must be cautious in simply trusting this religious tradition. The people writing it down were later Muslims who were writing about their Prophet - for many of them, the most important person who had ever lived! It isn't far-fetched to believe they might have had a bit of "bias" when they were writing.

The point to keep in mind is that every Prophet that had come before Muhammad - the final prophet - in the Jewish/Christian/Islamic tradition had been given a miracle by God that they performed. Moses, for instance, had parted the Red Sea; Jonah had survived the whale. What was Muhammad's miracle?

Muhammad's miracle from God was the holy Qur'an itself - his most perfect message, sent to a man who was illiterate - who didn't possibly have the ability to speak/write something so fine and so pure. It was a clear demonstration that he was God's messenger.

Devout Muslims, of course, believe that this was how it was and it may well be the case. But imagine, for instance, that Muhammad was an extremely well-educated writer/poet/scribe. While the Qur'an isn't any less beautiful or important for Muslims if this is the case, it makes Muhammad's "miracle" a bit less impressive, no?