15 Feb Financial Education: What Your Students Want, What Your Students Need
By Tanya Tanaro, American Student Assistance
As more students borrow and in higher amounts, higher education institutions are progressing toward a healthier, more holistic approach of introducing their students to financial literacy survival skills they’ll need in the real world.
How can you be sure your institution is delivering what students really want and need when it comes to financial education? As with any communication, financial literacy training needs to be designed with the learner’s perspective in mind. American Student Assistance, a nonprofit that helps students and alumni better manage college debt by giving them money smarts they can use for a lifetime, has conducted a number of research projects to help gain valuable insight. The following is a compilation of key findings that may offer guidance on creating a curriculum of value for students.
Methodology and Demographics
The research was based on:
- A web survey of 900 undergraduate and graduate borrowers from ASA’s portfolio (evenly split between those still in school and those who started to repay)
- A web survey of 1850 graduates, half with college debt and half without, with an age breakdown of 50% ages 21-25, 25% ages 26-30 and 25% 31-37
- Anecdotal information from ASA’s student advisory group and student focus groups
- Survey respondents were undergraduates and graduates of four-year public and private universities
Students are often portrayed in the media as having “no idea” how much they borrowed in student loans, but our research found that the overwhelming majority (91%) knew either the exact amount or at least within a few thousand dollars. Kudos to financial aid professionals! It’s possible that all of the media hype over student debt has made students more aware, but whatever the reason, it appears your messages (at least about debt amounts) are sinking in.
Paying for College and College Choice
Consistent with other national studies, two-thirds of our respondents took out student loans to pay for some or all of their college. For the most part, federal loans were used, although four in 10 have private loans and 15% have loans from their colleges or universities. Those with student loans also used scholarships, savings and grants, with four in 10 having some form of employment at the college to help pay for the education. Those without student loans most often paid for their education with personal/family savings, as well as scholarships.
Somewhat surprisingly, college affordability factored into attendance decisions for only about one-third of the students. Just over one-third (36%) agreed with the statement: “I chose my college based on what I/my family could afford,” while another third (37%) disagreed with this statement. Those who attended public universities were more likely to agree that affordability played a significant role in their choice than did those who attended private universities. Six in ten (64%) respondents borrowed what was needed to attend the college of their choice. This percentage was higher among the youngest age group (21-25), Whites, and women, and more students who attended private colleges borrowed what they needed to go to their chosen college than did those attending public colleges (71% versus 58%).
Student Loan Knowledge
As mentioned, the majority of students surveyed had a good grasp of loan balances and the number of loans they have, but their knowledge was sketchy about other details. About 55% knew the names of their servicers and monthly payment amounts; less than 50% knew the monthly due dates; 45% knew the interest rate and what will happen if they miss one or more payments; only 40% knew what repayment plan they’re using and 30% understand how long it will take to pay off their loans. A little more than 50% said they want to know more or need to know a lot more about their student loans – except for one student who replied “I wish I knew less about my loans. It’s pretty depressing.”
While some respondents indicated they preferred online communications, one commenter disagreed: “One problem I’ve had is that the (student loan) companies . . .try to get you to do paperless statements (i.e. save them money on postage) at practically every opportunity they have, which are easy to miss when you have several email accounts and they often get dozens of messages per day.” Other comments indicated students would like to see a disclosure of payment breakdown (principal/interest components), more information about consolidation, and one statement that shows all of their loans with the lenders, balances, and interest rates all in the same document.
Attitudes Toward and Experience with Debt and Financial Education
Approximately half of the respondents agreed that “Until I had to start paying back my loan, I didn’t think about how I was going to afford it” and this response was highest among Non-Whites and those ages 31-37. Half of the respondents also agreed that the amount of my student loan debt has directly impacted the choices I had to make in my life, such as my job, living circumstances,” while more than half ( 60%) aged 21-25, just beginning the process of debt repayment, agreed.
Sources of Information
The majority of respondents said they got information about general financial matters from online research (75%), parents (40%), friends (25%), financial aid counselor (15%), financial planners (10%) and professors (5%). Forty-five percent relied on parents for advice about paying for college, while just under 40% turned to financial aid counselors, 36% researched on the Web, 28% asked a lender, 18% used the college’s website, 15% talked to friends, 8% discussed with an academic advisor and 1% went to their Resident Assistant.
Financial Literacy Education
Those respondents with student loan debt feel strongly about two attitude statements: “Students who borrow money for college should receive financial counseling from the college before graduating,” with 72% agreeing with this (higher than for those without student debt, 66%) and “people with outstanding student loans generally need to be more careful about managing their money than people without student loans,” with 71% agreeing with this (asked only of those with such debt).
Financial Literacy for Alumni
The idea of having colleges offer program or courses on financial literacy or wellness to graduates of the colleges (rather than undergraduates) is highly rated. One-third (32%) find this idea “very appealing” and another third (35%) “somewhat appealing” for a total of 67%. There is higher appeal given by Non-Whites (36% “very” versus 31% for Whites), females (34% “very” versus 27% for males), and donors to their colleges (36% “very” versus 30% for non-donors).
In the face of mounting student loan debt and a shaky job market, higher education in the coming years must continuously prove its worth to an American public that grows increasingly doubtful of college’s return on investment. These survey results show that students and graduates are hungry to learn more about managing their finances. When you provide students with more robust financial literacy education, you not only help to create more financially proficient graduates, but also increase your institution’s perceived value and lay the groundwork for improved relations between alumni and alma mater – a win win all the way around!