College Grads Give Schools a “C” in Credit and Debt Education

Finance
Posted By Terri Williams on May 31, 2016 at 2:58 pm
College Grads Give Schools a “C” in Credit and Debt Education

When students leave college, they’ll have a final grade point average (GPA) that reflects the sum of their academic achievements. However, some graduating students are also grading their colleges on how well these institutions prepare them to handle financial matters.

And most schools won’t be on the deans’ list, the president’s list, or any other type of formal record reserved for excellent performance.  In fact, a recent survey reveals that most students give their school an average grade of “C” when it comes to preparing them to handle debt, credit, and personal finances. And 20% of students give their schools a failing grade in one crucial area.

The Experian College Graduate Survey Report polled soon-to-be college graduates (college students between the ages of 18 and 25 who were expected to graduate within 6 months) regarding their perceptions and experiences with credit and debt management. Selected excerpts are below.

Current financial security

40% of students rated their current financial security as POOR/FAIR

The top 10 reasons for their financial insecurity are as follows:
49% Don’t earn enough at part-time job
43% Relying on student loans
42% Expenses as a student are too . . .
42% Relying on my parents
40% Not enough to spend beyond . . .
36% Not putting money into savings
23% Pressure to spend beyond means
20% Not earning any money
16% Relying on credit cards
14% Work-study doesn’t pay enough

Future financial security

27% of students rated their future financial security as POOR/FAIR

The top 10 reasons for their financial insecurity are as follows:
55% Will have to start paying off my student loans
54% May not have a full-time job lined up
52% May not earn enough to add to savings
47% May not earn enough to spend beyond basics
47% May not earn enough to support myself
31% May have to move back home
27% Plan to continue my education post-grad
25% No high-paying jobs for my degree
25% May need to take out additional loans
25% Will have to pay off other debt

Types of debt

Among college students with debt, these are the 5 most pervasive types:

Currently Have Average Amount
Student loan debt 69% $22,813
Credit card debt 30% $2,573
Auto loan debt 23% $10,379
Home loan debt 12% $36,398
Other type of debt 6% $6,771

Buyer’s remorse?

When asked how they felt about their student loan debt:

57% Wish they had taken on less student loan debt
43% Comfortable with the amount of their student loan debt
54% Likely to defer student loans

Grading their schools

When asked to grade their college on how it prepared them for various scenarios, the college report card shows the following grades:

A B C D F
Life after graduation 32% 35% 23% 6.20% 3.80%
Managing a personal budget 20% 32% 26% 12% 9%
Managing credit and debt 20% 26% 25% 15% 12%
Knowing how credit scores work 21% 22% 21% 15% 19%

Closing the gap

Are colleges responsible for teaching financial literacy or are students responsible for taking the initiative to educate themselves? “Financial literacy education should be a responsibility placed on both the university and student,” says Dr. Jay Liebowitz, Distinguished Chair of Applied Business and Finance at Harrisburg University of Science and Technology. And his school is taking the lead in this area. “Last Fall, for example, we held a ‘Credit and Student Loan Management’ workshop by a leading guest speaker for our undergraduate students.” Liebowitz tells GoodCall that the workshop is just one of the many opportunities they offer their students to improve their financial literacy education, especially as it relates to student loan debt.

However, he admits schools that want to teach financial literacy face a litany of challenges. “Many teachers may not have the formal education to teach these classes, and schools don’t have extra money to re-train teachers and implement personal finance courses into the already overloaded curriculum.” And Liebowitz says that schools often view financial literacy as “nice-to-have” instead of a “must-have.”

And at home, he says that many families are not having conversations regarding the importance of building financial knowledge in their children.

However, Liebowitz, who is also the author of “Financial Literacy Education: Addressing Student, Business, and Government Needs,” proposes several steps to address these challenges:

  • The Student Financial Aid Office at the school or university can play a major role in further exposing the students to financial literacy and resulting loan obligations – this work will complement the faculty’s formal discussions in the classroom.
  • Mentoring programs can be established to promote both peer-to-peer mentoring in financial literacy and student-employer/faculty mentoring as well.
  • More states should require a personal finance course as a requirement for high school graduation.
  • Reaching out to the parents and families of the students and involving them in financial literacy education will greatly assist in leveraging the concepts discussed in school and applying them at home and work.

And Liebowitz notes that financial education must be ongoing. “In the U.S., April has been declared as Financial Literacy Month, but really, all 12 months should be financial literacy months!”

Terri Williams
Terri Williams graduated with a B.A. in English from the University of Alabama at Birmingham. Her education, career, and business articles have been featured on Yahoo! Education, U.S. News & World Report, The Houston Chronicle, and in the print edition of USA Today Special Edition. Terri is also a contributing author to "A Practical Guide to Digital Journalism Ethics," a book published by the Center for Digital Ethics and Policy at Loyola University Chicago.

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