There's no doubt that being a college student these days is difficult. From juggling academics, extra-curricular activities, part-time jobs, and social lives, there is a lot on students’ plates. Not to mention trying to manage their finances on top of all this.
College students are facing a growing financial literacy crisis. Many students are graduating with little understanding of how to manage their finances effectively, leading to significant debt and financial stress in the years after graduation.1
Financial literacy is a crucial life skill that can help students navigate complex financial decisions that they will encounter throughout their lives. From student loans to credit cards, budgeting, and investing – it is essential that students have a strong foundation in financial literacy to make informed decisions and avoid financial stress and anxiety in the long run.
This is a problem that needs to be addressed, and one potential solution is to require all colleges to offer mandatory financial literacy courses for students.
How Did We Get Here?
The United States Financial Literacy and Education Commission recently released a report urging institutions of higher education to make financial literacy courses mandatory for students.
The need for such courses is evident in the increasing student loan debt that has now reached $1.7 trillion, making it the second-largest debt market after mortgages.2
Data from the 2015 National Financial Capability Study revealed that 45% of individuals aged 18 to 34 had student loans and that 54% of student loan holders did not calculate their future monthly payments before taking out loans.3
On top of this, 53% of borrowers expressed regret and would have made different choices if they had the chance to do it all over again.
Unfortunately, the situation has not improved as the 2018 NFCS data shows that a majority of student debt holders did not attempt to estimate their monthly payments beforehand, and 42% have been late on at least one payment in the past year.3
This debt crisis is causing financial anxiety in young people, with 63% of individuals aged 18 to 34 reporting that they feel anxious when thinking about their finances.3
Why Financial Education Should Be Mandatory
Many universities and colleges have recognized the importance of financial education and have started offering personal finance courses. This is a great starting step toward improving college students' financial wellness.
However, financial literacy courses must become mandatory for all students, for three reasons.
Save Taxpayer Money
When a student defaults on their loan, the government may be forced to provide financial assistance to the lender, which ultimately comes from the pockets of taxpayers.
This assistance can take the form of loan forgiveness programs, which forgive some or all of the borrower's debt, or default mitigation programs, which provide financial incentives to lenders to work with borrowers to avoid default.
These programs can be costly, and the burden falls on taxpayers to foot the bill. So it is essential to take preventive measures by equipping students with basic knowledge and skills in order to lower student loan default rates.1
Increase Adherence
Financial literacy is an essential life skill that is critical to a student's success both during and after college.
However, without mandatory financial literacy courses, only a small fraction of students may end up taking them. This can lead to a situation where many students graduate without the necessary knowledge and skills to manage their finances effectively.
The students who are most likely to take financial literacy courses are those who are already interested in personal finance or who come from families with a strong financial education background.
This means that the students who are most in need of financial education, such as those from low-income backgrounds, would be the least likely to take these courses.
Keep Reading: How Financial Wellness Programs Increase Graduation Rates of Underprivileged Students
By making financial literacy courses mandatory, colleges can help level the playing field and ensure that students from all backgrounds have access to the knowledge and skills they need to succeed financially both before and after graduation.1
Standardized Curriculum
One of the key benefits of mandatory financial literacy courses is that they can help to establish a standardized and rigorous curriculum across colleges and universities.
Currently, financial literacy courses vary widely in terms of their content and approach, making it difficult to compare their effectiveness and ensure that all students are receiving a high-quality education.
By making financial literacy courses mandatory, colleges can establish a standardized curriculum that covers key financial concepts and skills. This can ensure that all students receive a consistent education from a great program that prepares them for the financial challenges they will face in their lives.1
Working With iGrad
In today's times, students are faced with many complex financial decisions that require a strong foundation in financial literacy.
It’s our responsibility to ensure that your students are set up for success not just academically, but financially as well. By making financial literacy courses mandatory, you can help your students avoid the stress and anxiety that comes with student debt and other financial issues.
This is where financial programs such as iGrad come in.
iGrad is a leading provider of financial education and wellness solutions, offering award-winning financial literacy programs designed specifically for higher education institutions.
By working together with iGrad, colleges, and universities can ensure that their students are well-equipped to navigate the financial challenges of college and beyond, setting them on the path to financial success.
1 - https://www.cnbc.com/2019/06/25/its-time-for-colleges-to-require-mandated-financial-literacy-courses.html
2 - https://home.treasury.gov/system/files/231/FY21-FLEC-ANNUAL-REPORT.pdf
3 - https://finrafoundation.org/knowledge-we-gain-share/nfcs
