Each year in December, the Department of Education (DOE) holds the Federal Student Aid Conference (FSA). It is a national conference for financial aid professionals. At this conference, I received the updates from the DOE. I also got an insight on the common issues facing college students and the college financial aid offices. One common thread became apparent to me during many of the presentations. Today’s college students face financial stress at an alarming level. This is due to the cost of college, the loans required to get to graduation and the complexity of the process.
Elizabeth Coogan, from the Department of Education, presented the session titled, “Financial Literacy Matters”. The program was co-presented with Phil Schuman from Indiana University and Bryan Ashton from Ohio State University. Both of the universities speakers, head some of the most advanced college financial literacy programs in the country.
Within my own college practice, I have observed the college financial stress of parents paying for college. The chart below was presented during this session and lists the percentages of students facing financial stress in general and in relation to college expenses. Nearly 60% of students across the board in all institutions face financial stress in relation to paying for college.
According to a national survey of 52 college campuses, anxiety is now the leading reason for visits to college counseling center. It is now a bigger reason than depression. Financial anxiety is one of the leading reasons for anxiety according to the survey and other studies.
The financial stress of paying for college can have a ripple effect for the student. It was discussed how 80% of the students indicated that poor academic performance was related to them being financially stressed. Some students even investigated dropping out of school. Research has shown that over 25% of students said that they did not purchase the required academic materials because he or she did not want to take out extra college loans required to pay for this expense. You can see how finances and academics can become intertwined.
Today, finances are the leading cause for students not completing college. Financial literacy is one way to help inform students about the cost of college. What was disappointing to me was the information listed on the chart below. The number of students who have never had a finance class or workshop in high school is close to 70%. It is no wonder that the student loan debt is over 1.3 trillion dollars.
For most college students, you would think that a personal finance course would be a definite elective taken while in college. This is not the case. The below chart indicated that over 75% of college students have not attended a class or workshop to learn about personal finance.
Many colleges are beginning to implement financial literacy programs on their campuses. Indiana University now has a required program for new students called MoneySmarts. This program provides financial information to their students to help them both during and after college. Another college, Ohio State University is helping their students by providing financial coaching appointments, group workshops and online interventions.
Gaining knowledge on student financial literacy and wellness programs should definitely be part of the college visit and discussion. I would even go a step further and have the current college bound student call the colleges on their list to see if such a program exists. Having the student involved and informed about their future debt is so important. Not every college will have a financial literacy program. It is something that should be investigated especially if the student will be taking on student loans to pay for their education.
With more careers requiring post graduate studies, having more information on general finances and student loan repayment will help students make better financial decisions. The college financial process understates the financial outcome of many decisions. Seeing the impact of dropping a course may have a significant impact on a student since the money paid is lost and now additional cost will be required to pay for the course or its replacement.
If your child is still in high school, see if your high school provides any literacy programs. The government website StudentAid.gov/resources also has a wealth of information for any student thinking about going to college. Becoming informed about future debt can help students and families make better college financial decisions. Knowing the four-year outcome can sometimes even change decisions for both students and families. Today, the cost of college and student debt makes it imperative for families to understand their costs. Knowing your expenses and becoming informed about future debt can help students and families make better college financial decisions.
As stated throughout this blog, having a vision of the outcome is critical. We have created the EFC PLUS tool and process to help families better understand the financial commitment of a college education. Without a plan, the student and family increase the risk of having significant stress during the college experience and possible debt surprises at graduation. Having a plan can minimize the surprises.