Three-quarters of college students in the United States experience moderate to high financial stress.1 Despite the promise of financial freedom that a university education represents, many students struggle with the economic realities of pursuing higher education. 

This stress can negatively impact their academic performance and mental health. It leads to a cycle of financial instability that can last beyond graduation and into their working years.

Universities have a critical responsibility to mitigate these financial stressors whenever possible – or transform them into the foundation of economic success. 

This transformation requires the presence of strategic financial education, the availability of support mechanisms, and institutional obligations to empower students in responsible financial management. 

The Stress Loop

Financial instability is felt almost immediately by a majority of college students. Nearly 70% of students take out loans just to attend, borrowing $30,000 on average.2 That debt, especially in the face of lower socioeconomic family status (through race, ethnicity, or other socioeconomic indicators), can set the stage for a stress loop.

Worrying about paying loans pushes students into part-time or full-time jobs, taking valuable hours away from their studies. Consequently, their academic performance may suffer, and their stress levels may continue to rise. 

Housing and food insecurity are other possible consequences, especially in community college settings. Between 20-40% of community college students struggle to eat properly; 13% are homeless.3

Often, students see dropping out as the only solution. Unfortunately, that decision only increases their financial woes. Without a degree, student loan repayment becomes even more challenging, often leading to default. 

In turn, defaulting on student loans can lead to long-term credit issues, further exacerbating their financial instability. 

Keep Reading: Can College Financial Literacy Programs Lead to Lower Student Loan Default Rates?

Breaking the Pattern

When Ben Kirkhoff, a high school senior in Minnesota, was asked about going to college, he told CNBC: "I don't want to put myself and my family in a lot of debt."4 Kirkhoff will instead go to Dakota County Technical College to become an electrician, despite his parents having a college savings account for him. 

The cost-benefit analysis, even for a potential student in relatively secure financial standing, is starting to tip in favor of non-traditional, less expensive pathways to career success. 

It's easy to see why.

The pattern of financial stress, which often begins with pursuing higher education, can be insidious and lifelong if not addressed early on. Immediate action is required from universities and colleges to break this cycle and lower student loan delinquency rates. 

A combination of strategic financial education, supportive resources, and cultural shifts in understanding and managing financial health are necessary within institutional environments for this transformation to occur.

Strategic financial education incorporates regular and consistent financial literacy programming. This should include the basics like budgeting, understanding loan terms, and repayment options, but also extend to more advanced topics like investing, retirement planning, and smart borrowing. 

An Institutional Blueprint

Students enroll in universities and colleges with an inherent passion for learning. They are eager, driven, and open-minded, ready to thrive in an environment that prepares them for a successful future. 

These students are not a passive audience. They don't avoid challenges. Instead, they welcome the opportunity to grow and navigate the complexities of their world. 

Given this commitment, it stands to reason that they would also be interested in learning how to manage their finances effectively – not just to survive but truly thrive and transform their financial future.

To support students on this journey, universities must start by embracing a simple assumption about students: They want to succeed. 

Universities need to recognize this inherent drive within their students. Acknowledge their struggles, provide the necessary guidance, and equip them with tools and resources to navigate the financial terrain more effectively. 

The following is a proposed five-section blueprint designed to accomplish those goals:

1. Identify the Issue

Properly identifying and acknowledging financial stress as an issue is the first, essential step. Universities can hold forums, surveys, and discussions to quantify and illustrate the magnitude of this problem among the students. 

Doing so will normalize the discussion around financial distress. It creates a culture where students can freely express their concerns and seek help without fear of stigmatization. 

Exposing these challenges is not to reinforce the inevitability of stress but rather to stoke the fires of change. To rally students, faculty, and administrators toward proactive, effective solutions.

2. Focus on Financial Literacy

Universities should offer stand-alone workshops and seminars that educate students on financial management principles. Cover not just the basics – like how to create a budget or understand loan terms – but also more complex topics, like:

  • Investing
  • Retirement planning
  • Tax implications

Beyond these scheduled sessions, provide additional resources for students at higher risk of financial distress, including:

Create a community of student learners who are as adept in their financial lives as in their academic or athletic pursuits.

3. Set Up Support Mechanisms

Universities need to proactively offer comprehensive support mechanisms to all students. These should cater to a wide array of financial needs, including:

  • Scholarships
  • Work grants
  • Student exchange program opportunities
  • Part-time on-campus job listings
  • Discounted or free learning resources
  • Affordable meal and living options

They should also provide emergency funds for students facing sudden and unexpected financial hardships. Establish a well-staffed financial aid office that students feel comfortable visiting. Genuinely become an institution that is not just focused on student learning but also on student living. 

4. Create a Financially Literate Campus Culture

A culture of financial literacy and responsibility is a powerful tool for transforming financial stress. Foster a campus culture that promotes financial literacy through:

  • Campus events
  • Financial wellness weeks
  • Faculty and student success stories 

Regular messaging on smart money management can go a long way in encouraging students to take control of their finances. Strongly project the institution as a financially conscious campus, where students are educated in their chosen fields and provided with real-world knowledge essential for financial stability and independence.

5. Establish Institutional Commitment

Campuses need to make a long-term commitment to address student financial stresses. It is an evolving process, with students' ongoing needs and circumstances that require constant attention and adjustments. 

Universities should view these efforts as not just one-off initiatives but a constant, vital part of their mission. Just as they aim to increase graduation rates, they should strive to lower student loan default rates.

Final Thoughts

Colleges must address the financial stress experienced by most of their students. Adopting the five-step blueprint above can aid them in transforming this debilitating stress into an avenue for financial success and independence, a hallmark of a comprehensive education. 

For those interested in seeing these principles in action, we invite you to explore the list of the best financial literacy programs around the country. These initiatives prove that when institutions invest in the financial success of their students, those students win – and so do the universities that support them.

 

 

1 - https://www.ncbi.nlm.nih.gov/pmc/articles/PMC8141976/

2 -  https://scholarworks.waldenu.edu/cgi/viewcontent.cgi?article=11138

3 - https://files.eric.ed.gov/fulltext/ED610982.pdf

4 - https://www.cnbc.com/2023/03/01/is-college-worth-it-what-the-research-shows.html