The Student Financial Crisis
Chatzky, Jean, Newsweek
Byline: Jean Chatzky
Our college kids can be dunces about money. Here's what they need to know about budgeting, credit cards, and splurging on Starbucks.
Right now, some 2.1 million students are packing off to college. By the time they graduate, they'll be well versed in Faulkner, microbiology, or Mandarin--but chances are, they won't have even a basic command of financial tasks like, say, living on a budget.
"So many students start college with no real idea how much it will [cost them to live], how much they have available to pay for it, or how to make up the difference between the two," says Oklahoma State University administrator Lance Mills. As a result, this year's freshmen will likely emerge with average debt well above even the staggering tab for 2011 grads: $4,138 in credit-card debt atop their $22,900 in student loans.
We have a financial-literacy crisis in America. Plenty of smart people are trying to combat it, unfortunately to grim results. In 2007, researchers at the University of Arizona launched a large-scale study of the financial attitudes and behaviors of college students by surveying one third of the freshman class. In 2009, they went back and resurveyed those students still enrolled. Nearly 20 percent of the students said they actually felt less knowledgeable the second time around. And while some students were coping with the recession appropriately, trimming entertainment and communication expenses, many more resorted to risky coping strategies like dropping classes, putting off health-care expenditures, and using one credit card to pay off another.
What are the parents of the class of 2015 to do? In the words of Crosby, Stills, Nash, and Young: teach your children well.
Last year's Credit Card Accountability, Responsibility and Disclosure (CARD) Act encouraged financial-literacy courses on college campuses but didn't mandate them, says Mark Kantrowitz, founder of the website finaid.org. As a result, kids who aren't getting this knowledge in high school (only four states require a class in financial education, according to Jumpstart, a coalition for fi nan-cial literacy) aren't getting it in college. That means parents are the only hope. Here are a few key lessons:
Wants and needs are different things. …