Meeting the Financial Literacy Imperative
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, originally broadcast on May 14, 2013, profiled Creighton’s successful implementation and outlined examples of resources which institutions can use when building their own financial literacy programs.
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.
Given our cost of attendance and high student loan indebtedness, the university decided that financial literacy was a service we owed to our students. When we began our program in 2010, the first step was to let everyone on campus know that there was a new resource available. I reached out to many departments, including admissions, the career center, student support services, residence life, Greek life, and athletics. My goal was to get buy-in on the importance of financial education so other departments could help me market and promote this new resource. I do a lot of one-on-one counseling with students who come in on their own, but also meet with groups and organizations at their request. Attendance at seminars is always higher when I partner with a group, because they do the marketing for me and sometimes provide food or refreshments.
How do students know there is a financial literacy resource on campus? Over 90 percent of our students receive some type of financial assistance. Typically, scholarship notification letters start going out in early December and financial aid award notification letters start going out in early March. We want students to start thinking about important financial matters early, and to keep thinking about them throughout the year. Just yesterday, I had a student in my office who knew they had been borrowing student loans every year, but had not paid close attention to the amount they were borrowing. He was a little surprised when we pulled up his loan history.
We want students to know there is someone to talk to on campus about important financial matters if they need help. In addition to the notification letter, I am on the parents’ agenda for our admitted student days and summer preview events. This is a great opportunity to let parents know about available resources and a good time for them to talk to their child about finances. I am also on the orientation schedule for some of the professional schools. The school newspaper, as well as our local paper, have run articles, but word-of-mouth is the best advertisement.
When our law school community expressed concerns about the amount of student loans being taken out, the dean required all first-year students to attend a budgeting session. This session included a panel with three Creighton Law graduates talking about how they made their budget work while in school, how student loan repayment was going, and what they would have done differently while in school. I also led an information session for our pre-med society, to help sophomores and juniors who are considering medical school understand their financing options. Many students today want to access financial info on their smartphones, tablets, or laptops. I developed a web page for Creighton that was user friendly, short, and relevant. For students who only want to look at one page, there’s a “Helpful Tips” section. This page has six bullets on topics such as using credit cards responsibly. Students can then click on a bullet of interest to learn more. There are also some online learning modules, videos, links to other resources, live and recorded webinars, and games and activities. Miller: Nelnet has some free resources you can share with your students.
We offer a weekly financial literacy webinar series called “Money Mondays.” Each month we discuss a new topic, like debt management, budgeting, understanding credit cards, and student loan repayment tips. You can view these at www.nelnetloanservicing.com/financial-literacy. We also offer archived recordings of the webinars for students to watch at their leisure. Another resource is our financial literacy library, which includes worksheets on money management, identity theft, credit cards, and more. Some of these are interactive, like our budgeting worksheet. These PDFs can be downloaded from our website and are customizable. We also offer actively managed tuition payment plans. Sometimes students have a balance on their tuition after financial aid and that total might look a bit overwhelming to them, so they immediately think they need to take out a loan. However, that total might be manageable if it’s broken down into smaller payments. Anything to bring down that average student loan debt is a positive.
To watch this web seminar in its entirety please go to http://www.universitybusiness.com/ws051413