From managing loans to controlling spending, many students entering college find themselves dealing with a host of financial responsibilities for the very first time. And it’s not uncommon for them to trip up.
Campus financial literacy programs can help students steer clear of some of their most common financial mistakes. The challenge for educators is to find creative and clever ways to get their attention.
Perhaps a fun title for a financial literacy course would help. For instance, at Adelphi University in New York, business professor Rakesh Gupta teaches the first-year seminar “Your Money and Your Life.” Gupta, formerly the dean of Adelphi’s Robert B. Willumstad School of Business, developed the course a decade ago with a grant from the Citigroup Foundation. Like other university faculty members and administrators pushing financial literacy nationwide, Gupta aims to show students that good financial decisions and a good life go hand in hand.
The results of the latest “Money Matters on Campus” survey, sponsored by Higher One and conducted by EverFi, prove there’s desperate need for financial guidance. Released in April, the study polled 65,000 college students to gauge their financial knowledge and to determine how attitudes about money may predict behaviors. Fewer than 50 percent of the students responded correctly to any one question in the knowledge portion of the survey.
“Students struggled with things like what to do if they had too many credit cards and how much money they need to set aside for emergencies,” says Mary Johnson, a financial literacy expert at Higher One.
Jack Tharp, senior director of financial literacy at Indiana University, says that students’ needs can vary depending on their class level. Budgeting might be the most pressing issue for freshmen living away from home for the first time. Upperclassmen may be more interested in preparing for life after college, including how they’re going to repay loans and find an affordable place to live.
Here are the biggest issues college financial literacy experts talk about when asked where students go wrong with money:
Overloading on student loans
Many college-bound students don’t have a clear idea of the cost of an education, or a plan for how they will cover it, says Brenda Vaughn, a senior financial literacy consultant at TG. That lack of planning can cause students to be too quick to sign up for hefty loans.
Indiana University officials created an Office of Financial Literacy in fall 2012 to raise awareness about excessive borrowing and help students make better decisions. In January 2013, the office launched its MoneySmarts website, featuring money management tips and podcasts as well as budgeting and loan repayment calculators.
Students with financial worries are encouraged to meet or video chat with a student member of the IU MoneySmarts Team, which also gives presentations at the institution’s seven campuses.
By the 2013-14 academic year, the number of IU students taking out federal loans had dropped by 12 percent over the previous year, and the amount of money borrowed decreased by the same percentage. University officials give the credit for that data to the focus on financial literacy.
The University of Texas, meanwhile, has built the interactive website seekUT, which allows students to search the salary and debt statistics of alumni in various majors one year and five years after graduation. Before taking out loans, students can get an inkling of whether or not their chosen careers will produce enough earnings to repay the debt.
UT is the first U.S. system of higher education to have such a site, which uses data integration and visualization technology from SAS.
Failing to budget
College students often have a hard time living within their means because they don’t have a budget to guide them, says Adelphi’s Gupta. For that matter, even older adults tend to recoil from the idea of drawing up a spending plan, says Shakeela Hunter, director of the Money Management Center at The University of Texas at Arlington. “It’s the fear of actually writing it down and seeing where your money is going. Budgeting is a habit you have to learn.”
On the Money Management Center’s website, UT-Arlington students can play interactive games—such as Financial Soccer and Money Metropolis—designed to teach lessons on budgeting, setting financial goals and working to save money.
And at Clark Atlanta University, upperclassmen and graduate students trained on financial literacy modules from TG meet with younger students for 30 to 45-minute budget-planning sessions. Students will soon get advice from staff counselors and volunteers on budgeting and other finance topics via Skype, FaceTime and ooVoo, says director of financial literacy James Muhammad.
Financial aid administrators at The University of Tennessee at Chattanooga plan to pilot a program next year that lets students receive aid in monthly installments instead of one lump sum.
“The idea is to force them to live on a little bit at a time,” says Director of Financial Aid Dianne Cox. “How many of us, if we got paid for four or five months at a time, would be able to not overspend?”
Getting carried away with credit
Treating a credit card as a ticket to easy cash is the most common blunder that Dean Obenauer, assistant director of financial aid for financial literacy at Creighton University in Nebraska, sees students make. He advises students that despite the benefits of credit cards, responsible use is key.
“While it’s good to have it for emergencies, emergencies don’t happen at the mall,” Obenauer says.
Muhammad and other counselors at Clark Atlanta recommend to students that they spend no more than a third of their credit limit. Students can pull their credit reports at the financial literacy office, and Muhammad will explain how scores can be improved.
At the University of Tennessee, students have also gotten help understanding their credit histories, through sessions led by American Student Assistance reps on how to check credit scores.
The Minnesota State University Student Association launched a “Walking Debt” campaign with grant funding from Higher One Financial Literacy Counts and Affinity Plus Credit Union Foundation in Minnesota. Zombies warn about the dire consequences of uncontrolled debt.
The program’s website includes a credit card debt estimator that reveals how long it could take to pay off the full balance, says Shannah Mulvilhill, the association’s director of development and programs.
Losing track of spending
Each semester, Gupta asks the students in his class at Adelphi how much they spend on monthly phone charges. For most of them, the response is always the same.
“No idea, because somebody else is paying for it,” Gupta says. “How much money do you spend on eating out? No idea. … They have no sense of the money coming in and going out.” Gupta has students list all their income, gather some bills and make estimates about other spending so they can see where their money goes.
Obenhauer from Creighton adds that students using debit cards often fail to stay on top of spending and cash flow. “It’s so easy to swipe that debit card that you’re not keeping track of how much you’re spending.”
Choosing the wrong housing or meal plan
Campus tours tend to highlight the amenities with the greatest wow factor, which sometimes leads students to pick room and board options that don’t fit their budgets.
Or their lifestyle. For example, Sharon Lassar, professor and director of the School of Accountancy at the University of Denver’s Daniels College of Business, has noticed that money in dining hall plans is often wasted because students eat off campus more than they or their parents anticipate. Lassar says meal plan choices should offer enough flexibility and variety for students to get their money’s worth.
For students who cook their own meals, the University of Tennessee at Chattanooga’s “Live Like a Student” events have featured a speaker from a local supermarket offering tips on eating well on a budget. To help boost attendance, the speaker brought some samples of food to taste.
Hunter and her staff at UT Arlington assist incoming students by reviewing their financial aid packages before choosing housing and meal plans. This counseling, she says, has helped students save as much as $3,000 per term.
And if they’re using the school’s online budgeting tool, they will see all the more how those funds could be going to help pay for other pricey items, such as books—a line item with a suggested budget amount of $908 per semester and one for which financial planning is key.