It’s just past mid-terms and you are listening to an upset student tell you he left school because he made some poor financial decisions. He purchased a second car that he can’t afford, he has mounting credit card debt, and he told you he was not able to pay his bills and continue to attend college. As a result he dropped out the middle of fall semester to get his bills in order, not realizing that he still owes the college for some unpaid charges and now may owe back some of the federal aid he received. What can you do to ensure he finishes his degree? What could you have done earlier to prevent this situation? Teaching the basics of financial literacy at multiple stages during their educational careers can help students like him before they get to the point of dropping out.
Many young people are not prepared to manage their finances when they reach adulthood. At the same time the current financial service marketplace is becoming more complex. For many young people, going into the workforce or entering higher education is the first time they may have had to make some financial decisions, and they may end up learning some hard-learned (and expensive!) lessons. Students’ unfortunate borrowing choices have an impact on colleges and universities as well; an institution’s Cohort Default Rate and Gainful Employment data can suffer when students continue to make uninformed educational, career, and repayment decisions.
We may agree that financial education programs are necessary for today’s students. But are they effective? There is a tendency for people–not just young people–to tune out the minute finances are discussed. The Coalition of Higher Education Assistance Organizations’ (COHEAO) Financial Literacy Awareness White Paper (November 2012) outlines qualities that improve student retention. Three specific qualities that the publication emphasizes are critical to any financial literacy education strategy are relevance, interaction and repetition.
Relevance refers to the probability the student will need the information in the near future. The effectiveness of financial education is increased when it is personalized and can be applied to the student’s own situation. College students are often managing their own money for the first time–a time when student loans are an option to help pay the bills. What better time to offer budgeting help and student loan management information?
Interaction forces the student to apply what they are learning to their own life. Educational videos and games can be used to encourage students to interact and apply what they are learning. Mapping Your Future’s Showmethefuture.org and iGrad.com are two online sites that provide interactive tools to engage students and provide relevant real-world examples. Using students for peer-to-peer counseling is also highly effective. For a more comprehensive list of websites, see the COHEAO’s White Paper (link in Resources below).
Repetition can be a highly effective educational tool. Introducing personal finance lessons into various initiatives such as online curriculum, new student orientations, classroom courses, workshops, e-mail communication and student events can reinforce the importance of financial literacy. The goals of a financial education plan should be integrated through each activity and carried out throughout the year. Use different types of resources to repeat information and engage students as well: videos, games, books, calculators, webinars, newsletters, chats, and social media are popular and can help you have a continuous message about the importance of financial literacy.
Finally, have a way to track your results. Use pre- and post-testing and surveys or focus groups to help determine your most successful campaigns so you can build on your plan’s strengths and gauge student satisfaction.
COHEAO Financial Literacy Awareness White Paper
The Financial Awareness Counseling Tool (FACT) on StudentLoans.gov provides tools and information to help students understand their financial aid and manage their finances:
2014 FSA Conference Session 37: “Financial Literacy Resources and Updates: What Student Borrowers Need to Know”
Federal Aid Toolkit: Financial Literacy
FDIC’s Money Smart Financial Education Program
Other online Federal resources
Other free financial literacy resources
National Endowment for Financial Education: http://www.nefe.org/
NEFE’s CashCourse for campus use: http://info.cashcourse.org/
CNN’s Money 101: http://money.cnn.com/pf/money-essentials/
Goodwill Community Foundation’s Money Basics: http://www.gcflearnfree.org/moneybasics
360 Degrees of Financial Literacy: http://www.360financialliteracy.org/
$ALT: Financial Literacy: http://studentaffairs.vancouver.wsu.edu/financial-aid-and-scholarships/salt
iGrad’s College Financial Literacy Compendium: http://cdn.igrad.com/Docs/PDF/College-Financial-Literacy-Compendium.pdf
Loan servicers, banks and credit unions also offer a multitude of financial literacy resources.
This Tip of the Month was provided by your RMASFAA Training Committee