College students struggle with basic financial concepts, according to a National Association of Student Financial Aid Administrators (NASFAA)1.
After surveying over 100,000 incoming freshmen, the study found that most students could only answer two out of six questions related to financial matters.
This is a matter of concern because they are becoming responsible for their financial choices and doing so without the necessary information.
When it comes to financial questions, what are your students asking?
Here are the 25 most common questions among students and how having a student financial wellness plan can provide the answers and help students gain strong financial habits.
Personal Finance Questions
1. Do I need a budget, and how do I create one?
One survey2 found that only 39% of four-year college students used a budget. Additionally, 38% never check their account balance.
This is despite half of the students worrying that they will not have enough money to last the semester and almost half worried about keeping track of their money.
Budgeting can help students get a handle on these financial concerns.
2. Do I need to file my taxes?
Some of your students may be filing taxes for the first time.
Because of the many different tax laws, students often have questions that depend on their unique circumstances.
3. Can my parents still claim me as a dependent?
Your student may wonder whether their parents still claim them as a dependent, especially if the student is responsible for paying for their own college education.
They may also wonder if they can claim a live-in partner or roommate.
If they are married, they may have questions about their spouse, children, or even their aging parents.
4. What does investing mean?
According to a recent study3, 86% of GenZ is interested in investing, but 45% don’t know how to get started.
Students are turning toward social media to get investing information. Unfortunately, these sources are often not accurate.
5. Do I need to think about saving for retirement now?
A Morning Consult report4 found that only 39% of people begin saving for retirement in their 20s.
Nonetheless, financial advisors suggest saving 10% of one’s income starting as early as possible to take advantage of compounding interest.
When it comes to your students’ personal finance questions, a student financial wellness program can:
- Define, show examples, provide tools, and encourage students to create and use a budget
- Explain general IRS guidelines and forms
- Show the benefits of compounding interest
- Help students understand how much money they need for retirement
- Provide tips for saving effectively and avoiding early retirement withdrawals
Checking and Savings Account Questions
6. How do I open a checking account?
Although 85% of undergraduates have a checking account5, that still leaves quite a few students without one.
If they arrive on campus without an account, they are more likely to have issues conveniently paying for purchases and may be less likely to budget.
7. My new job wants my bank account routing number and account number so they can automatically deposit my check. Where do I find these numbers?
82% of employers prefer to pay employees using direct deposit6.
Knowing how to find the routing and account number for their accounts will be necessary for most students working while in school.
8. What is an emergency savings fund, and do I need one?
Only 40% of college students7 put money away in an emergency savings account.
Unfortunately, nearly two-thirds of college students run out of money mid-semester8 at some point in their college career.
A student financial wellness program can help students answer their questions about checking or savings account and more:
- Teach about the accounts, how they work, and why they are important
- Help students discover the need for emergency savings
- Provide tips for saving
Student Loan Questions
9. How do I fill out the FAFSA form?
Thirty percent of first-generation and low-income students feel that filling out the FAFSA form is difficult9.
Based on the Education Advisory Board (EAB) survey, students from these populations are far more likely to fill out the FAFSA without parental help.
10. What is the difference between a grant, federal loan, and private loan?
Based on a survey from the Princeton Review10, 98% of students will use some form of financial aid to pay for college.
Yet, these students often do not understand how financial aid works.
11. When do I have to start paying back my loans?
Despite the number of students needing loans, two-thirds of students fail the Financial Educators Council student loan test11.
A College Avenue survey12 found that only 37% of students understand the terms of their loan. This is why student loan exit counseling is so important.
12. How much will my monthly student loan bill be?
The same College Avenue survey found that 69% of students do not know what their payment will be.
13. How much interest will I pay on my student loan?
The average monthly student loan payment is approximately $460, and the average borrower takes 20 years to pay off their student loans.
Based on these estimates, a student is likely to pay $26,000 in interest over the life of the loan12.
Student loan debt letters are a great way to help understand how much money they're borrowing, how much they'll owe, and when they have to start paying it back.
14. What are other ways to pay for college if I don’t want to take out student loans?
Students have many options to help pay for college.
Unfortunately, 85%13 don’t realize that FAFSA determines their eligibility for grants and work-study in addition to loans.
Providing a student financial wellness program can help students:
- Understand the financial aid process
- Learn how student loans work
- Discover alternatives to taking a student loan
- Learn about FAFSA
- Determine how much money they should borrow, if any, based on their projected income
Other Loan Questions
15. What is a personal loan?
This is a loan that a student takes out with a bank. How the proceeds of a personal loan are used is up to the student.
16. Is a car loan a personal loan?
Car loans are similar to personal loans, with one exception – they are designed specifically to purchase a car.
They are designed to help people buy a car that they cannot afford to purchase outright.
17. Is a mortgage a personal loan?
Once again, a mortgage is similar to a personal loan. However, a mortgage is a loan made specifically to buy a home.
Standard mortgages are 30 years, but can be less.
Mortgage payments start with a large percentage going toward interest. This is called an amortized loan.
A student financial wellness program can:
- Explain various loans and loan terms
- Provide tools for determining loan payments
- Explain amortization
- Discover ways to get the lowest interest rates
Credit Card Questions
18. What is a credit card, and how does it work?
Although this may be hard to believe, thirty-two percent of teens do not know the difference between a debit card and a credit card14.
19. Can a student get a credit card?
A survey from CrediCards.com found that there are more student credit card options in the past two years15.
20. Is making a minimum payment on a credit card enough?
Many students assume that since they will not receive a penalty for paying the minimum balance on their credit card, that this is a good practice.
However, paying only the minimum, which is about 2% of the balance, adds a lot of interest to a purchase.
21. Are credit card points something to consider when choosing a credit card?
Credit cards often offer points for purchases.
You can trade these points for cash, miles toward airline tickets, gift cards, or prizes.
They may even offer bonus points for signing up and making a certain number of purchases within the first several months of having the card.
How can a financial wellness plan help students with their credit card questions? By:
- Explaining how credit cards work and when interest accrues
- Providing a tool showing interest paid when keeping a credit card balance
- Tips on how to evaluate finding the right card based on interest rate, fees, and promotions
- Tips on reviewing credit card promotions
Credit Score Questions
22. What is a credit score, and how is it calculated?
Students are not savvy when it comes to credit scores. A recent study16 found that 37% of Americans have no idea how their credit score is determined.
23. What is considered a good credit score?
Another study found that students believe anything over 500 is a good score. In fact, one-third of students believe that a good score is below 30017.
24. How can I start getting a credit score without going into debt?
On average, two-thirds of college students have credit card debt. The average debt upon graduation is $3,28018.
25. Can a poor credit score affect my future?
A look at American credit scores shows that one in five is subprime19.
Students graduating with bad credit may not be able to lease an apartment, get utilities in their name, or even get certain jobs.
Low credit scores also lead to higher interest rates, higher insurance premiums, and higher deposits on things like utilities.
A student financial wellness plan can explain:
- What a credit score is
- How they are calculated
- How to improve scores with strong financial habits
- The role credit plays in their future
1 - https://www.nasfaa.org/news-item/14855/Survey_Incoming_College_Students_Struggle_With_Basic_Financial_Literacy
2 - https://www.usnews.com/news/blogs/data-mine/2015/04/02/college-students-becoming-less-financially-responsible-study-says
3 - https://www.prnewswire.com/news-releases/survey-finds-gen-z-lacks-knowledge-and-confidence-in-personal-finance-and-investing-301260281.html
4 - https://www.cnbc.com/2019/09/04/the-age-when-americans-start-saving-for-retirement.html
5 - https://www.cnbc.com/2017/06/06/bank-and-credit-card-fees-cost-college-kids-795-million.html
6 - https://work.chron.com/direct-deposit-work-employers-5650.html
7 - https://thehill.com/changing-america/enrichment/education/561249-40-percent-of-college-students-are-saving-up-for-an
8 - https://www.edvisors.com/press/survey-shows-two-thirds-run-out-of-money-03-2016/
9 - https://www.insidehighered.com/admissions/article/2021/04/12/why-students-dont-fill-out-fafsa
10 - https://www.princetonreview.com/college-rankings/college-hopes-worries
11 - https://www.collegeavestudentloans.com/press/college-ave-student-loans-survey-finds-only-half-of-college-students-that-borrow-student-loans-feel-confident-they-can-repay/ https://www.financialeducatorscouncil.org/student-loans-financial-education-test-results/
12 - https://educationdata.org/average-student-loan-payment
13 - https://studentloanhero.com/featured/college-students-dont-know-fafsa/
14 - https://www.ngpf.org/blog/question-of-the-day/question-what-percent-of-teens-dont-know-the-difference-between-a-debit-card-and-a-credit-card/
15 - https://www.creditcards.com/credit-card-news/student-card-survey/
16 - https://www.cnbc.com/2019/01/04/about-4-in-10-americans-have-no-idea-how-credit-scores-are-determined.html
17 - https://everfi.com/press-releases/survey-reveals-that-us-high-school-students-lack-adequate-financial-knowledge/
18 - https://collegefinance.com/research/college-student-debt-and-credit-card-usage
19 - https://www.badcredit.org/how-to/bad-credit-statistics/