College is expensive.
This is not news, but the degree of expense has ballooned in recent years.
A year at a private college that cost $36,180 in 2010 is now $46,448, an increase of 48.9%.1
More and more students are taking out large loans to cover the skyrocketing cost of education.
College remains the best choice for pursuing lucrative careers, though. College graduates make an average of 75% more than non-college graduates.
The average return on a college degree is 14%, a rate of return that is difficult to beat with any other investment.2
But the environment after graduation is rougher than usual, thanks to the global pandemic.
The jobless rate remains elevated, with the February rate at 6.2%, down from an April 2020 high of 14.8%.3
Additionally, the burden of student loan debt weighs more heavily on graduates now than ever.
At the end of 2019, before the pandemic, student loan debt stood at $1.41 trillion.
During 2020, most colleges shut down in-person classes, but student debt continued to grow. At the start of 2021, student loan debt in America topped $1.57 trillion.4
Student loan debt has also proven to have an effect on other aspects of financial life. Those carrying school debt delay purchasing a home by an average of seven years, according to one study.
And in 2019, an estimated 11.1% of student loan debt was 90 days or more delinquent.5
The CARES Act of 2020 allowed for the forbearance of much student debt, which helped many borrowers. But it also made clear that many students borrowed without a thorough understanding of loan terms.
In fact, one survey found only one in three students fully understood the terms of their loans. Additionally, only about half of students think they will be able to repay their loans.6
College students are not facing just one crisis but several stacked together, all with extreme financial impacts.
And for many students, college is the first time they are dealing with financial choices on their own.
All these factors add up to one fact: financial health and education for students is more important now than ever.
The U.S. Financial Literacy and Education Committee stresses the role higher education institutes should have in financial education.
Some of their recommendations include:
- Integrate financial education into core curricula
- Enhance the frequency and timing of communication with students
- Use peer educators7
This is why more and more colleges are working with financial wellness providers to integrate a holistic program into student life.
Teaching students how to handle personal finances not only help the students but the colleges as well.
Financial stress can lead to longer times to graduation and higher attrition rates as students drop out.
This affects a college’s profit margin and reputation. Financial education courses help increase four-year graduation rates as well as average GPAs.8
April is National Financial Literacy Month, making it an ideal time to focus on the vulnerable student population's financial education and health.
Students without school debt are less likely to postpone important life events like marriage, purchasing a home, or buying a car.
Keeping their finances healthy can help to keep the national economy healthy.5
COVID-19 was an eye-opener for all Americans. More than 18 million jobs disappeared in a matter of weeks.3
Thirteen percent of college students delayed their graduation.9
Student loan debt, already a national crisis, grew even further despite measures like forbearance and deferments.
48% of students reported a financial setback due to the pandemic.10
Horror stories of being unable to repay student loan debt can keep potential students from entering college.
It is important to give students the tools and education necessary to make good financial decisions.
The importance of creating a financially sound population moving forward cannot be denied.
April is a time to explore new resources that are available to understand more about personal finances.
As President Obama said in 2016, “[t]his month, let us encourage informed financial decisions and promote resources that help the American people make them.”11
1 - https://educationdata.org/average-cost-of-college
2 - https://www.cnn.com/2019/06/06/success/college-worth-it
3 - https://www.bls.gov/charts/employment-situation/civilian-unemployment.htm
4 - https://www.investopedia.com/student-loan-debt-2019-statistics-and-outlook-4772007
5 - https://www.thebalance.com/student-loan-debt-crisis-breakdown-4171739
6 - 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/#:~:text=While%20the%20majority%20of%20students,financial%20terms%20associated%20with%20them.&text=Nearly%20half%20(43%25)%20will,is%20part%20of%20the%20benefits
7 - https://home.treasury.gov/system/files/136/Best-Practices-for-Financial-Literacy-and-Education-at-Institutions-of-Higher-Education2019.pdf
8 - https://journals.sagepub.com/doi/10.2190/CS.10.3.c
9 - https://www.insidehighered.com/quicktakes/2020/06/23/report-covid-19-has-hurt-college-students
10 - https://www.activeminds.org/wp-content/uploads/2020/04/Student-Survey-Infographic.pdf
11 - https://obamawhitehouse.archives.gov/the-press-office/2016/03/31/presidential-proclamation-national-financial-capability-month-2016