Making the case for campus financial literacy programs
Good money habits start early. The power of interest means those who start saving, investing and paying off their interest rates young have an advantage over those who wait.
As students make the transition from college to a full-time career, they face numerous important financial decisions that will impact their lives for years to come. Many, however, feel unprepared to make the choices that will help them become financially independent and able to cover their own expenses.
Though college students might have an educational advantage, their financial skills could use a boost. The 2012 Financial Capability Study surveyed 5,500 people ages 23 through 35 and found only 24% could demonstrate basic financial knowledge when tested.
Students find financial education lacking
There is a growing demand for financial student services on campuses. Bank of America and USA Today commissioned a survey of 2,180 18 through 26 year olds and found that less than half of those who attended or were attending college (31 percent) thought their schools had done a good job teaching them strong financial habits.
The survey, published in Oct. 2016, found 43 percent said they wished they learned how to invest, 40 percent wished they had learned how to do taxes and 26 percent wished they had learned how to manage monthly bills.
While students can certainly acquire financial basics through their own life experiences, Levine said that's a risky way to learn. Financial mistakes can leave lingering marks on your credit.
The biggest immediate risk students encounter once they graduate is their student loans. About 16 percent of student loan borrowers default, and just one missed payment can tank your credit score.
"That can not only severely limit your ability to get other credit, it can also impact your ability to get a job," since many employers review credit history during the application process, Lanza said.
Managing student loan debt is only part of the financial knowledge students will need once they graduate, since their payments will have to fit into their budget for housing, food, transportation and hopefully savings, Levine said.
Golden, of NEFE, expects the demand for financial education among young people to continue to grow. Many people in or entering college grew up during the financial recession and are paying a lot more attention to money issues, he said.
How to provide financial education
Campus financial literacy programs can be part of the student success solution, said Paul Golden, a spokesman for the National Endowment for Financial Education, which provides online financial education to more than 1,000 schools through its CashCourse program. College administrators can't just pick any program, though.
Administrators need to ensure the programs are providing trustworthy information and not selling financial products or services, Golden said. The curriculum also needs to be relevant to a college audience, covering topics like how to create a budget or the basics of credit and not necessarily how to game the stock market.
The Jum$tart Coalition for Personal Financial Literacy, which includes 150 financial literacy organizations, has a list of best practices for developing or choosing financial education materials. The best programs are balanced, unbiased and based on learning, not memorization, said Laura Levine, president and CEO of Jump$tart.
"We want them not only to learn how to make a good financial decision but where to get additional help and information," she said.
It's best to deliver financial knowledge in digestible pieces, rather than all at once, Dashiell said. For example, a good time to teach students about budgeting is when they're new on campus, while students about to graduate might be more receptive to information on how to manage their soon-to-be-due student loan payments or even start and run their own companies.
A teachable moment
College is a crucial financial time in young adults’ lives. Paying for college is increasingly one of the biggest purchases they’ll make.
For these reasons, "it's really important that they approach that decision with the financial knowledge that's needed to make that type of consumer purchase," said Allesandra Lanza, director of communications for American Student Assistance.
ASA provides financial education at more than 300 partner colleges from the University of Alabama to Alverno College in Wisconsin through its Salt program. Because of how much students are borrowing to afford rising tuition rates—about $30,000 per borrower—college is the "ultimate teachable moment," Lanza said.
Students need to learn money basics so they can manage their student loan debt and avoid delaying other financial steps like buying a home or starting a family, said Joanne Dashiell, manager of professional services for ASA.
"There's a long-term impact that we're seeing with student loan borrowing, and we want to be able to help students make a long-term plan for how they manage that debt," she said.
Colleges can play a critical role in making sure the information they receive comes from a reliable source.
Myles Ma is a writer and editor at Credit.com
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