The U.S. Financial Literacy and Education Commission believes that colleges and universities are perfectly suited to helping students understand important financial concepts and make sound student loan decisions.
According to the commission’s report, this is even more important due to the ever-increasing student loan debt crisis.
A Look at the Student Loan Crisis
Although many see this crisis as one that affects only the borrower, student loan debt affects the entire economy. High student loan debt prevents people from buying homes, starting businesses and saving for retirement, among many other things.
Consider these key statistics:
- U.S. federal student loan debt: $1.4 trillion
- U.S. private student loan debt: $119.31 billion1
- Average student loan: $28,650 in 2016
- Number of Federal student loan borrowers: 43 million
- Federal student loan borrowers in default: 5.2 million
We all know that the cost of a four-year college degree is daunting. According to the National Center for Education Statistics, the adjusted for inflation cost of a bachelor’s degree rose 34 percent between 2004-05 and 2015-16.
Studies show that marginalized and poorer populations are at higher risk of ending up with debilitating student loan debt: Those with lower incomes, women and African American women are hit hardest and often have a more difficult time repaying their loans while meeting day-to-day expenses.2 You can read more about the effects of the student loan crisis in this whitepaper: Diplomas, Debt & Default.
The Commission’s Key Recommendation
The commission found that students are not financially literate. In fact, barely over a quarter of the students could answer three simple financial questions correctly. When asked about their student loans, these students also had little understanding about the loan, its repayment terms, and how the interest rate will affect their payoff amount.
Due to these findings, the commission’s key recommendation is that higher education institutions should be required to offer financial literacy classes so that students can make the best financial decisions possible concerning their education and how to pay for it.
In addition to mandatory classes, the commission recommends providing:
- Trained peer educators
- Integrated financial literacy into other required core curricula
- Continued communication with students about financial topics rather than just when they enter and exit the degree program
- Targeted financial literacy programs for specific student populations to meet their individual needs and concerns
- Career counseling to help students determine the correct degree based on ability and desires in order to increase the likelihood of achieving a degree
- Information to prepare students to pay back their loans upon graduation that includes repayment options, budget for repayment, and the benefits for continued education
It’s Time to Offer a Financial Wellness Program
iGrad agrees with the commission that financial literacy should be mandatory. We understand that as the cost of tuition rises and student loan debt increases, it is increasingly necessary for higher education institutions to assume some responsibility in offering students information, resources and guidance concerning the costs associated with earning a degree.
With iGrad, colleges and universities can offer personalized financial information to each student in every demographic. Through the use of articles, multimedia content, videos, tools, games, and quizzes, students can get the information needed to make informed choices prior to taking out student loans, as well as a student loan tracking tool to help prepare students for student loan repayment. Finally, iGrad appeals to students by using proven techniques that increase engagement. To learn more about increasing student engagement in your college’s financial wellness program, download our Best Practices for a Campus-Wide Financial Literacy Initiative.
To see how the iGrad platform improves financial wellness for college students, check out our demo video here.