Colleges teach students first-class finance

Every semester, hundreds of freshmen at Champlain College in Vermont gather in a campus meeting room to play the “Game of Life.” It’s not the traditional board game.

Instead, this event simulates financial decisions students will make after graduation. Each student is assigned a salary based on their major and then turned loose in a room full of options—booths that offer apartments, homes, groceries, insurance, transportation and other essentials.

After students decide how much to spend on each necessity, they must go to the final station, where they “pay” taxes, student loan installments and retirement plan contributions.

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“Many of them realize that they actually can’t afford the things they chose, and they might go back and get a roommate or decide to take public transportation instead of buying a car,” says John Pelletier, director of Champlain’s Center for Financial Literacy.

Many colleges and universities are ramping up their efforts to teach students how to manage loan payments and other expenses.

As the U.S. Congress debates the reauthorization of the Higher Education Act, “one thing that Republicans and Democrats agree about is that colleges aren’t doing enough to educate students about loans and how repayment works,” Pelletier says.

“I believe colleges have a moral obligation to give students the tools they need to manage the obligations they’ve taken on to attend those colleges.”

Administrators sometimes have trouble finding a captive audience, yet they need to reach students who don’t attend one-on-one counseling sessions or pursue this information on their own.

That’s why financial aid staffers are requiring participation in personal finance-focused campus events and pushing in to classrooms where students can’t help but become engaged as they realize how much they don’t know about their financial futures.

Helping students realize what they need

When Niki Pechinski arrived at the University of Minnesota Duluth as financial literacy educator in 2013, she learned right away that she “needed to get into classes,” she says. “I held financial literacy workshops, and even if I had free food, it was really difficult to get students to come for optional events.”

Today, Pechinski lectures about 50 times each year in freshman seminar classes and leads workshops in a variety of other classes, including engineering and math.

Each semester, she also teaches a two-credit-hour money management course for freshmen as well as a financial peer mentor training class that is required for financial management majors and minors.

Pechinski speaks regularly to student organizations, too. “Talking to students in their classes or association meetings is huge,” she says. “Once they start listening, many of them realize this is information they need and they become engaged.”

At Champlain College, financial aid professionals don’t go into classrooms, but they provide required financial literacy experiences, like the Game of Life and other life skills learning opportunities. “We just don’t think we’re doing our job if a student leaves college without an understanding of finances and how to manage them successfully,” Pelletier says.

Getting the whole campus involved

Many colleges do not require financial literacy activities. The onus is often on a financial literacy educator or committee to promote classroom-based financial education to academic leaders and faculty.

For instance, when Pechinski realized she needed access to students in their classrooms, she began building relationships across the University of Minnesota campus.

Faculty in the chemical engineering and math departments were particularly receptive, so she has been invited to present in many of those classes. And word travels, so successful presentations in one department have often led to more invitations from other professors.

The University of Iowa’s financial aid office, staffed by three full-time financial literacy professionals, also focuses on making connections across campus to promote its services and raise awareness of the need for financial education, says Sara Even, associate director of financial literacy and academic progress.

She suggests working closely with the registrar, retention office, bursar, dean of students and academic advising office.

In 2013, Indiana University established its Office of Financial Literacy, which works with financial aid but employs three of its own full-time staff and a graduate assistant to provide financial education across campus.

They hang posters, run ads in the campus newspaper, “and have lots of meetings with various departments, letting them know we exist and the different presentations we can do,” says Philip Schuman, director of financial literacy.

The efforts have paid off: In 2013, Indiana’s financial literacy group reached about 400 students through in-class presentations; this year, it will reach about 2,000.

Some institutions form a financial literacy committee—including financial aid staff, academic leaders and others—to provide presentations and workshops, Pechinski says.

Indiana’s Office of Financial Literacy started the Higher Education Financial Wellness Summit, a national conference for financial literacy instructors.

“Tons of people from different departments attend—librarians, professors, people from various positions,” Schuman says. “Financial literacy can’t be siloed in one department. If you have someone who’s willing to take it on as a passion project, that’s who should be doing it. It doesn’t matter if they’re not in a financial office.”

Cross-campus collaboration is not only important for successful financial literacy efforts, but it is a moral obligation, says Champlain’s Pelletier.

“Some financial aid offices say, ‘We don’t have time to do this,’ and academic deans say, ‘It’s not my job,’ ” he adds. “Many colleges simply couldn’t exist without the student loan money that students borrow to come there. So colleges must give students the tools they need to manage that debt.”

Covering the biggest concerns

When professors invite financial aid professionals into their classrooms, it’s crucial to ensure the presentation is worth giving up class time. And when students find the content to be relevant and helpful, they will be more likely to act on it.

Topics that have most interested students at Minnesota Duluth in recent years include borrowing, credit and budgeting, Pechinski says.

To ensure that she’s delivering timely and relevant information, she polled freshman seminar students last semester about the types of financial information they want—which confirmed that they’re hungry for existing lesson topics such as student loans and budgeting.

At Indiana, the financial literacy office has a “set menu” of presentation topics, such as loan repayment and how credit scores work. When a professor or group organizer schedules a presentation, usually one of these presentations fits their needs.

But staff will also develop customized presentations, Schuman says. For students nearing graduation, Champlain covers more advanced topics such as salary negotiations and credit repair. Also, his group is often asked to speak in classes at the School of Public Health.

“Financial wellness is a component of public health, in that the elimination of stress brought about by finances can make people healthier,” Schuman says.

“We work with the School of Public Health to help educate students on how to organize finances in such a way that it mirrors who they are as a person, and we provide them with strategies to be more efficient with their finances.”

Creating future donors

Administrators have several options when measuring the effectiveness of money management lessons. At Iowa, the financial literacy module was added to the freshman experience course, Success at Iowa, in fall 2017. Ninety-two percent of students polled said they found the content useful.

Based on pre- and post-test scores, students’ confidence in managing money increased by an average of 30 percent.

Financial literacy efforts can also improve cohort default rates (CDR) when students better understand how to handle post-college financial obligations. “CDRs are interesting, but they don’t tell the whole story,” says Minnesota’s Pechinski.

“I get phone calls from alumni who are making their payments but they’re struggling financially. It’s beyond CDR. Every individual gets to decide how OK they are with debt, but for a lot of people, student loan repayment is very stressful and impacts their choices for a long time.”

Lessons in financial literacy help by preparing students to better understand their post-college repayment commitments as well as to make more informed choices about future jobs, salary negotiations, housing and budgets to manage those debts.

For many colleges, the bottom line is that educating students about finances is simply the right thing to do. Efforts will likely also pay off for the institution in the long run.

“These programs are low-cost efforts that really benefit students,” Schuman says. “And when students graduate with less debt, they’re more likely to give back to the university.”

Nancy Mann Jackson, an Alabama-based writer, is a frequent contributor to UB.