In general, students enter college with very little understanding of personal finances.
Yet, despite the lack of financial literacy, they are expected to navigate through the financial maze of adulthood, dealing with such things as:
- Student loans – Do I need one? How much of a loan do I need? Is a private loan better than one through the school? Which lenders are trustworthy? Does the interest rate matter? What is a good interest rate?
- Budgeting – How much will the school year cost? How much should I budget for food and other living expenses? Will I have enough to pay for the living expenses? Do I need to get a job? Should I get a summer job? How much money should I try to save for next year?
- Credit and Debt – Should I get a credit card? What type of credit card should I get? Does the credit card company matter? Should I pay more than the minimum payment due? How much interest will I owe if I only make minimum payments? Are there fees for making late payments? Will credit card debt be a problem when I apply for an apartment?
Although all students have these questions, some students find them more difficult to answer.
Federal TRiO Programs (TRiO) were designed to help low-income and first-generation college students get the help they need to graduate from college.
This includes a financial literacy component because financial decisions made in college will follow them after they’ve left campus.
TRiO college programs have turned to financial wellness platforms to help increase student financial literacy skills.
As students learn about financial topics from budgeting to investing, they are learning skills to help them manage their finances over their lifetime.
Additionally, by providing financial literacy to TRiO students, college TRiO programs are helping students achieve better academic outcomes.
Graduating and Doing So on Time
Ideally, students should spend four years completing an undergraduate degree.
However, data shows that only 19 percent of students graduate in this timeframe1.
National Center for Education Statistics2 shows that only 62 percent of students graduate in six years.
For lower-income students, like those participating in TRiO programs, the numbers are even worse, with just 21 percent earning a degree in six years.
Many of those who do not graduate find themselves in poorer financial circumstances for the rest of their lives. College dropouts:
- Earn $21,000/year less than their college grad counterparts3
- Are less likely to achieve financial goals like saving for retirement or purchasing a home
- Leave college with student debt and almost half default on their loans4 leading to poor credit
College graduates fare much better, but the longer it takes to graduate, the more the education costs. This can lead to extra debt in the form of student loans.
For instance, the average student loan debt for a college student who graduates in four years from a public school is $27,082, with 65 percent of students taking a loan.
On the other hand, 81.5 percent of students who take six years to graduate take a loan, with the average amount of debt at $32,0855.
Financial wellness programs can help TRiO students understand the impact of graduating and doing so on time.
Plus, providing a financial wellness program shows students that their success is a priority.
The author of The College Dropout Scandal6, David L. Kirp, found that when colleges put student success first, the dropout rate is reduced.
Graduating With Less Debt
Students taking out loans likely don’t realize the long-term implications of this debt.
The Young Americans and College Survey by Ameritrade7 found that graduates with student loan debt often delay adult milestones, such as:
- Moving out on your own
- Buying a home
- Getting married
- Having children
- Saving for retirement
This is because having student loan debt causes anxiety for 55 percent of graduates, and only three out of ten graduates felt they received sufficient information about student loans and how to pay them off8.
Additionally, students entering college are often under the impression that they will not need to take a student loan. For example, a Navient study shows that only 38 percent of incoming freshmen planned on using student loans, but 60 percent actually did9.
Financial wellness programs can increase student awareness about using loans and find alternatives to student loans. This includes how to fill out the Free Application for Federal Student Aid (FAFSA) and apply for scholarships. This information can help students reduce their student loan debt upon graduation.
Lower Student Loan Defaults
The Financial Literacy and Education Commission10 found that most students do not understand the loans they take out to get their education.
In general, students do not understand:
- Financial terms and concepts
- How repayment works
- When interest starts accruing
- That some actions that stop loan repayment don’t stop interest from growing
- Student loan debt letters
With a strong financial wellness program, TRiO students can learn about student loans and repayment, what happens if they drop out of school, and how student loan debt, especially student loan default, will impact them in the future.
Improve Academic Performance By Decreasing Financial Stress
The Ameritrade study shows that students are worried about finances.
Three quarters of Gen Z students and two-thirds of Millennial students worry about:
- Paying for college
- Ability to pay day-to-day living expenses
- Student loan debt
- Economy
- Finding a job after graduation
One of the biggest side effects of financial stress is mental health issues.
A Clinical Psychology Review11 report found a significant relationship between financial distress and depression, suicide and attempted suicide, alcoholism, drug dependence, and other mental health disorders.
Digging Deeper Into the Psychological Costs of College found that such mental health issues were significantly associated with lowered GPAs12.
When stressed and dealing with the mental health issues associated with stress, students are preoccupied with their financial state. This keeps them from being able to focus during class or while studying.
Additionally, financially stressed students may also have to take on employment, which can decrease the hours they spend on academics.
A financial wellness program can help TRiO students learn about personal finances, from budgeting to saving to building credit and everything in between.
Data from an iGrad Financial Wellness Program user found that using the program for one year reduced financial stress by 23 percent13.
The Right Financial Wellness Program
When looking at financial wellness platforms, TRiO programs should look for holistic programs that meet the needs of the students served.
Here are some things to consider when choosing the right program:
- Does the program offer a wide variety of courses, tools, quizzes, videos, articles, and multimedia content?
- Does the program focus on both skills and behaviors?
- Is both pre and post-testing available?
- Is the program personalized to fit a student’s situation and needs?
With the right financial wellness program, College TRiO programs can successfully help students have better financial outcomes while in college and throughout their lives.
1 - https://completecollege.org/wp-content/uploads/2017/05/4-Year-Myth.pdf
2 - https://nces.ed.gov/programs/coe/indicator_ctr.asp
3 - https://www.collegeatlas.org/college-dropout.html
4 - https://www.thebalance.com/managing-student-loans-delinquency-and-default-316290
5 - https://www.savingforcollege.com/article/average-student-loan-debt-at-graduation
6 - https://www.amazon.com/College-Dropout-Scandal-David-Kirp/dp/0190862211
7 - https://s2.q4cdn.com/437609071/files/doc_news/research/2019/young-americans-and-college-survey.pdf
8 - http://schools.igrad.com/financial-literacy-resources/diplomas-debt-default/?utm_source=iGrad-Blog&utm_content=whitepaper-feeder-post&utm_campaign=Content
9 - https://navient.com/assets/about/who-we-are/Financing-Higher-Education_Navient-EverFi_April2017.pdf
10 - https://home.treasury.gov/system/files/136/Best-Practices-for-Financial-Literacy-and-Education-at-Institutions-of-Higher-Education2019.pdf
11 - https://www.sciencedirect.com/science/article/abs/pii/S0272735813001256?via%3Dihub
12 - http://media.wix.com/ugd/fc6e9a_5e5b517f8dd343e88ad8923692291767.pdf
13 - https://www.enrich.org/financial-wellness-behavior-change-data-study
