Magazine article University Business

Meeting the Financial Literacy Imperative: Helping Students Understand Their Debt and Teaching Money Management Skills Should Be a Priority for Higher Ed Institutions

Magazine article University Business

Meeting the Financial Literacy Imperative: Helping Students Understand Their Debt and Teaching Money Management Skills Should Be a Priority for Higher Ed Institutions

Article excerpt

A University Business Web Seminar Digest * Originally presented on May 14, 2013

As the average student loan debt rises, financial literacy is essential for graduates to successfully manage their post-college lives. Some institutions are going beyond just educating students about tuition payment plans and federal financial aid options. Others, like Creighton University (Neb.) are offering full financial literacy programs to educate students on money management during the college years, and more importantly, beyond. This web seminar profiled Creighton's successful implementation and outlined examples of resources which institutions can use when building their own financial literacy programs.

Jodi L. Miller: If personal finance education can be made a consistent focus of our schools, then our adults will be more educated on the subject, more inclined to practice good money management, have less financial stress and worry, and ultimately lead healthier lives. These are goals that we want for all of our students.

The rise of student loan debt is a growing concern. In 2011, 66 percent of college seniors had student loan debt; the average debt load was $26,600. It appears that this number is going to continue to increase. With that, I think student loans have gotten a bit of a negative stigma recently. It is important to point out that student loans, specifically federal loans, are one of the many financial tools used to get an education. There are many different repayment plans available to students, depending on their unique financial situation. But if students leave school with debt, ignore their repayment obligations, and don't have a good understanding of how to manage their finances, then there's a good chance they may default on their student loans.

Why is student loan default bad for an institution? Right now, the National Cohort Default Rate is 9.1 percent. This is important to know because the Department of Education imposes sanctions on institutions whose default rate is over a certain percentage. Nearly 1,200 schools have lost student loan program eligibility because of their default rate.

To keep your default rate low, you can start a financial education program at your institution. You may think you do not have the funds to get started, but you don't really need a lot of money. You can begin small and build your program over time. It's good to talk with other schools that have a program in place and learn how they got started. Know that financial literacy is something that crosses a lot of departments on campus. Be sure to collaborate; one way is to start a financial literacy committee with representatives from different departments to help get a program started. Many schools use student workers to get input on what works and what doesn't. What is the best messaging? What will resonate with them? Student feedback is invaluable, as the financial literacy program is in place for them. Be sure to promote your program. If you do all of the work and don't get the word out, no one can benefit.

There are lots of approaches to a financial literacy program. Some examples include offering a one-time orientation on personal finance or student loan repayment. You can also offer some in-person workshops. One best practice is to offer something else that's going to entice students, like free food or a giveaway, since financial literacy might not be on the top of students' minds during this time.

Some schools have gone on to create college courses for credit, which is a great incentive. Another option is to employ finance majors to be peer mentors. It's really easy today to create a website, so develop one with different financial literacy links and resources that students can use. There are a lot of different methods for instituting a financial literacy program; it's about what works for your institution.

Dean Obenauer: Given our cost of attendance and high student loan indebtedness, the university decided that financial literacy was a service we owed to our students. …

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