Student financial wellness has become a hot topic in higher education. Financial literacy programs can take some effort, but this type of programming is incredibly important to student success. Here are three reasons why money management education is needed for students:
According to Organizational Behavior and Human Decision Processes, financial stress is one of the top reasons students drop out of school. This is especially true for first-generation students; 30 percent drop out of school within three years. These students tend to have less money for education and lack the advice and support of family members with higher education experience.
According to a Wall Street Journal blog post, the average class of 2015 graduate with student loan debt has to pay back more than $35,000 in student loans. And more than 71 percent of bachelor’s degree recipients graduated with a student loan, compared with less than 50 percent twenty years ago and about 64 percent 10 years ago.
Unfortunately, it is clear that students are not well-versed on student loans and the overall cost of college. The National Association of Student Financial Associations (NASFAA) reported that 65 percent of high-debt student loan borrowers were surprised or misunderstood aspects of their loans or the borrowing process, and the Brookings Institute found that 50 percent of all first-year students in the U.S. seriously underestimate how much student debt they have.
Education on student loans and repayment will make students more aware of what they owe and their options for successfully paying it back. Additionally, financial literacy education on topics such as budgeting, credit scores and debt management will help students better manage their money, making them likely to be able to afford those loan payments.
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In the 2016 national freshman motivation to complete college report, Ruffalo Noel Levitz reported that only 47.3 percent of students feel they have the financial resources to complete their education, and that figure drops to 36.4 percent for first-generation students. Almost a third of all of the students in the report agreed that they have financial problems that are distracting and troublesome. Students can’t be expected to perform at their highest level when dealing with these types of stress.
Financial stress caused by student debt can also follow students into their post-college years. According to a survey of 18-29 year-olds conducted by Bankrate, 29 percent have put off buying a car, 19 percent have put off marriage and 30 percent have put off buying a home due to student loan debt. Developing good money management skills is an important part of setting students up for success during and after school.
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When working with faculty and administrators on student success plans, as soon as financial literacy comes up, it’s not uncommon to see everyone turn to the financial aid office for ownership, development and delivery.
There are many reasons why. Often, we assume that money management education efforts and financial literacy are related to default prevention or that only students receiving financial aid need money management education. Financial literacy efforts need to be a campus-wide initiative and would be better served with their own structure or owned by a cross-functional task force.
Here are some reasons why:
So, while financial aid administrators must be key players in developing and delivering money management education, the odds for a successful effort are greater when that education is developed and delivered by a campus-wide coalition of faculty and administrators.
Each brings a unique perspective to the effort and creates multiple opportunities to provide students and community members with information that will help them be successful in school and in life.
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