What brings about financial stress in college students? It’s hard to say because it depends on the individual student. For some, something as small as a $250 car repair can cause enormous stress, while for others, something as large as $100,000 in student loan debt feels inconsequential.
Regardless of the level of debt that brings on stress, many college students eventually experience it.
The State of Higher Education 2022 Report found that 76% of four-year college students who are considering dropping out of college do so because of stress. Of those, one-third stress about finances.1
A Student Voice survey found that even more students struggle with financial concerns2. These include:
- Food insecurity – 25%
- Housing insecurity – 17%
- Work at least 30 hours per week – 20%
- Very worried that something as simple as a car repair would cause them to drop out of school – 35% (another 29% were at least somewhat worried about such an expense)
- Will graduate with student loan debt – 77.5%
- Do not know how much debt they will have – 20%
- Most who know how much they owe do not know how much their payment will be
It is clear that students are struggling. By delving into the Student Voice report further, we can determine what financial wellness components colleges and universities should focus on to best help their student population.
#1: Providing a Place to Get Sound Information
The Student Voice report found that students aren’t necessarily looking to the best sources for their financial information. As it turns out, students look to:
- Parents – 62%
- Personal research – 52%
- Another family member – 25%
- Friends – 21%
- High school class – 23%
- College class – 11%
The topics of these conversations range from budgeting to credit card use to investing in the stock market. However, there are many concerns about the information gained outside of classes.
For example, when talking with friends, how accurate is the information? And are they discussing the right aspects of the topic – how does repayment of student loans work vs how much money did you get as a refund?
The same holds true when talking to parents.
According to a recent FINRA study, only one in three Americans can answer at least four of five basic financial literacy questions correctly3. This means many parents do not have a solid grasp of personal finances and are unlikely to provide the best advice to their children.
Personal research is also suspect. A recent study by GOBankingRates found that 38.8% of GenZ got their financial information through social media4. This includes 34.3% who get their information from TikTok and YouTube and another 7.2% from forums like Reddit.
Even courses offered in high school and college may provide incomplete information. Many of these programs do not offer financial aid literacy or how to determine if a college is a good financial fit.
Offering a financial wellness program can provide students with solid financial information – but only if they know the program exists.
The Student Voice survey found that two-thirds of students had no idea if their institution offered or required financial literacy classes or programs.
That’s why it is important to both provide a student financial wellness program and communicate its existence to students.
Consider adding information to all current school webpages, creating a social media campaign, and attaching financial wellness materials to communications already sent to students.
#2: Helping Students Accurately Define Their Financial Literacy
Overall, forty-two percent of students rated their financial literacy as good or excellent. Twelve percent believe they have poor financial literacy, while a majority (43%) believe their knowledge is fair.
Those who identify as white, male, straight, and/or Republican tend to have a stronger belief in their financial knowledge.
But are these numbers justified? According to the Next Generation of Financial Capability report, college students, on average, could only answer two out of six financial literacy questions5.
- Understood emergency savings accounts – 14%
- How to handle credit cards – 29%
- The effects of late payments on credit history – 62%
- How to calculate net worth – 47%
- Effects of inflation – 16%
- Federal Student Loans – 34%
Just because a student is involved with financial products such as checking and savings accounts, investments, and cryptocurrency, does not mean that they have a strong understanding.
Even students who believe they have an excellent knowledge of financial concepts need help. Financial wellness programs for students should help them:
- Gain a basic understanding of financial concepts
- Teach them strong financial habits such as paying off credit cards monthly and saving a portion of each paycheck
- Understand the total cost of college using a tool like iGrad’s Award Letter Analyzer
- How much student loan debt is wise based on projected earnings upon graduation
#3: Providing Students With Necessary Tools to Handle Financial Crises
The Student Financial Wellness Survey found that many students would have difficulty accessing $500 in case of an emergency6.
With between one in four and one in five students experiencing food insecurity, housing insecurity, or both, financial wellness should provide students with the tools they need to handle money problems.
Without these tools and resources, students are far more likely to drop out of school.
Keep Reading: How Financial Wellness Programs Prevent College Dropouts
Student financial wellness programs should:
- Teach students to save for emergencies
- Provide emergency grants
- Provide resources for accessing community emergency food, shelter, loans, and grants
#4: Provide Students with the Information They Want
One of the refreshing findings of the Student Voice survey is that students want to learn about finances. These include:
- Services to help navigate personal finances
- Emergency aid programs and funds
- Personal finance education for now and for after graduation
- Partnerships with banks for student-friendly credit cards
- Workshops and events about personal finance
Additionally, since students talk with friends about college costs, student loans, budgeting, investing, and saving, these may also be topics they would find useful.
For more information, read: The 25 Most Common Financial Questions College Students Are Asking
By offering a financial wellness program, you can offer students a strong foundation to keep them from dropping out of college and help them find success post-graduation. If you're interested in learning how iGrad can help you educate students about personal finance topics, take a look at how other colleges are working to improve their student's financial literacy.
1 - https://www.luminafoundation.org/resource/the-state-of-higher-education-2022-report/
2 - https://reports.collegepulse.com/financial-wellness
3 - https://www.usfinancialcapability.org/downloads/NFCS_2018_Report_Natl_Findings.pdf
4 - https://www.gobankingrates.com/money/financial-planning/34-percent-gen-z-learning-personal-finance-from-tiktok-youtube-survey-finds/
5 - https://info.everfi.com/rs/410-YCZ-984/images/EVERFI-Next-Generation-FInancial-Capability-Report.pdf
6 - https://www.trelliscompany.org/wp-content/uploads/2021/12/SFWS-Report-Fall-2020.pdf