Dollars and Sense
Six years ago, when Ted Beck became president and CEO of the National Endowment for Financial Education (NEFE), a nonprofit dedicated to helping Americans become more financially capable, student financial literacy had been overlooked by colleges and universities for a number of years.
"When I would talk to university presidents, parent groups, and students, they all thought [financial literacy] was a very important skill, but it was lacking in the college setting," recalls Beck.
Now more than ever, financial literacy is crucial. Record unemployment levels mixed with an unprecedented amount of student loan debt could be a recipe for disaster for recent college graduates if they don't know how to manage their money.
In fact, college seniors who graduated in 2009 carried an average of $24,000 in student loan debt, up six percent from the previous year—and the unemployment rate for that group rose from 5.8 percent in 2008 to 8.7 percent in 2009, the highest annual rate on record, according to a report by the research and policy group Project on Student Debt. In the same year, seniors graduated with an average credit card debt of more than $4,100, according to Sallie Mae's National Study of Usage Rates and Trends focusing on credit cards.
"In the current economic climate, recent college graduates who borrowed for their education face unique challenges in paying back their student loans," the Project on Student Debt report states.
Flash forward two years to 2011 and the forecast is equally grim. So what does this mean for college and university administrators? Implementing some sort of financial literacy program on campus is key for the future success of students as they graduate and advance into careers.
Following are five tried-and-true tips for getting started.
1. Develop a solid base of helpful web content.
It goes without saying that the easiest way to reach today's student is via the web. That's why it's important to have financial literacy materials that students can return to again and again available online, either through your institution's website or through a partnership with an outside site.
"We think that repetition is the most important thing," says Rob LaBreche, CEO of iGrad, a company that provides online content for 40 client institutions. "Schools can give financial literacy lip service and just go through the motions, but if they find a solution that includes a reason to come back, that's where real learning starts."
The iGrad site gives students at partner institutions access to a customizable online community where they can access videos and information about student loans, how to read their first paycheck, 401k programs, and any other helpful financial information. In-house editors write articles daily, so the content remains fresh and relevant. The site also features career resources and free resume critiques.
"When we build our content, we almost set it up as Facebook meets LinkedIn," says LaBreche, explaining that students set up a profile and information is pushed out to them based on their specified major, grade level, and interests. "We think that, if it's too generic, [students] are not going to care and won't want to come back to the site. … If it's generic, it's not really relevant to their lives."
CashCourse, a NEFE-developed site for students and those up to two years out of college, offers information ranging from meal plans to financing a semester abroad to managing daily spending. Beck says the idea was inspired by what he has come to call the "President's Dilemma."
"What we were hearing from the university presidents was 'we know this is important, but we don't have the money to do it,' 'a natural home to house it,' and in many places, 'we don't have the money to maintain it to make sure it's current,' " he recalls. "NEFE was in the position where we could build a program, maintain it, and turn it over to the school."
The site was started three years ago with 10 partner schools and has grown to 600 (the product is only available to nonprofit institutions). Because NEFE is funded entirely through an endowment, everything is given away for free—and there are no advertisements from financial institutions cluttering up the screen. Partner institutions receive a specific CashCourse URL and can customize the look and content to fit the needs of their students. "Various sections on the CashCourse website address whatever circumstances students are in, says Juliette Newcomb, financial aid counselor in the Oklahoma State University Scholarship and Financial Aid office.
Oklahoma State has been using CashCourse since 2009 and was recently placed in NEFE's top 20 list for most traffic to their site. Newcomb credits this to her office's promotional efforts and linking to CashCourse on the institution's financial aid website.
Whether or not you turn to a professional service or build your own financial literacy website, having a place where students can browse on their own time is crucial. But, warns Beck, taking on the challenge on your own requires funding for both developing and maintaining a site. (Note: NEFE spends more than $300,000 a year to maintain CashCourse.)
2. Get the word out.
Ensuring campus organizations know about the program can help garner support for financial literacy efforts from a large and diverse number of students.
In July 2010, Creighton University (Neb.) laid the groundwork for its financial literacy program by hiring Dean Obenauer as assistant director of financial aid for financial literacy—a new position on campus that is 60 percent devoted to financial literacy. Obenauer had previously worked in the financial aid office there from 1998 to 2004 educating graduate and professional students about credit card and debt management issues.
"Schools can give financial literacy lip service and just go through the motions, but if they find a solution that includes a reason to come back, that's where real learning starts."—Rob LaBreche, iGrad
"Because of being a high-cost private school and because of the amount of student loan indebtedness students leave with, it was a service we needed to provide," says Obenauer.
He says he spent the first year in his position getting the word out about his role to student service offices, academic departments, clubs, and organizations. "At this point, a lot of students seem appreciative of a refresher, even to reinforce that what they're doing is good," he says.
At Valencia Community College (Fla.), Director of Student Financial Assistance Bradley Honious and his team don't have the captive audience of residence halls to get their message out. He says the institution serves a lower-income population, many of whom work full-time jobs and simply come to campus for their class and leave. "We try to piggyback the financial learning initiatives with any student activity going on to reach as many as possible," he says.
This "reach all students" mentality can help make or break a financial literacy program. Last year, staff at Iowa State University's Financial Counseling Clinic, available to all students and partially financed by the student government, provided workshop presentations to more than 2,700 students by visiting classrooms, the Greek community, and residence halls. Jeanna Nation, financial counselor and lecturer, shares that more than 50 workshops were held around campus—an impressive number for a staff of two part-time financial counselors. "We're hoping that if we can reach [students] early, hopefully they're more prepared before they leave to start their career," she says.
Oklahoma State's financial aid department uses new student orientation classes to spread the word about its CashCourse offerings. Newcomb and her colleagues set up eye-catching informational tables in the student union and food service areas. The counseling staff wear buttons advertising CashCourse, "just to get the conversation started," says Newcomb.
3. Think in terms of wellness.
A good way to get people thinking about financial literacy is to have them realize it's part of their overall wellbeing. Obenauer of Creighton prefers the term "financial wellness" over "financial literacy."
"When it comes to health, we all know there are things we can do to take better care of ourselves," he says. "So looking at it from that point of view where you're talking financial wellness, there are things we can do to take better care of ourselves financially by making good choices." In helping students build a set of financial skills, he makes sure they know how they're spending their money and what they can or can't do without so they're ready for graduation and the real world.
At Valencia, there is also a link between financial literacy and health. The ambassador program, where students are stringently recruited and trained to reach out to their peers about financial wellness, is inspired by a long-running peer education program focusing on health and wellness. Taking similar steps to educating the population about both issues brings financial literacy to the same level as staying healthy.
4. Offer a variety of resources.
When it comes to financial literacy, it's true that variety is the spice of life. Expecting students to keep visiting a website or attending programs where the content is boring or never changes simply isn't realistic.
"We feel that if a school provides financial literacy, but it's very narrow, meaning [students] learn something in some modules and take a test, that's nice, there's definitely some knowledge gain there, but it's been proven time and time again that it's short-term learning," says iGrad's LaBreche. "We try to provide long-term learning." This is why iGrad features video-based entrance and exit counseling, for example. "We know that audio and visual put together create a much better learning experience."
Valencia's financial aid website links to numerous outside resources for students who want to learn the basics, and to other more specific resources for students with advanced financial interests. "We understand that students have different learning styles," says Honious.
5. Add it to the curriculum.
Websites and on-campus activities are typically extensive enough for the average student, but for those who are particularly interested, adding classes or majors into the curriculum could be helpful.
Iowa State has even begun offering an undergraduate major called Family Finance, Housing, and Policy, after which graduates can pursue careers as financial counselors and planners, insurance agents, loan officers, mortgage originators, and in other related fields. "Students are required to go through a financial counseling skills course once they've had some basic personal finances," says Nation, pointing out that students outside the major have shown interest in that course, as well.
It helps that the university's administration has made it a core mission to increase financial literacy and awareness across campus. Two years ago, a one-credit financial literacy course for incoming freshman was added to the curriculum. Nation says this is meant to be a transitional course and that it has had "really great enrollment over the past couple years."
With these tips in mind, there's no better time than the present to start educating your students about their finances and develop a financial literacy program—or improve an existing program.
"I think if you look at our overall economy right now, it's a good picture as to why everyone needs to learn how to manage their finances," says Nation. "And if they haven't learned that in their home, the next best place is in school."
Creighton University Financial Literacy Website (click on Financial Literacy)
Click here for a list of financial literacy programs and tools.