Universities are increasingly prioritizing financial literacy for students, often with the primary goal of reducing student loan debt, delinquencies, and defaults.

Other objectives include decreasing student financial stress, decreasing the dropout rate and providing valuable skills that will help students manage finances for a lifetime.

iGrad has released a comprehensive whitepaper about the cycle of student loan debt: “Diplomas, Debt & Default: How Financial Wellness Helps College Student Break the Cycle.”

Student loan debt is a major national economic issue: 

  • About 65 percent of students who graduated from four-year public and private nonprofit colleges in 2017 had student loan debt. 
  • 2017 graduates of public and private four-year colleges owed an average of $28,650.
  • 44.5 million Americans collectively owe $1.5 trillion in student debt, second only to mortgage debt, according to the U.S. Federal Reserve. At this rate, analysts predict national student loan debt could reach $2 trillion by 2021.
  • It is projected that 40 percent of borrowers could default on their student loans by 2023.

Since the late 1980s, the cost of undergraduate education has risen 213 percent at public schools and 129 percent at private schools (adjusting for inflation), according to the College Board Trends in College Pricing 2017 report. 

Sixty percent of college students say they are responsible for covering more than half the total cost of their education, and 55 percent said they are mostly responsible for determining their loan options in a May 2018 nationwide survey of college students by Ascent Student Loans.

As a result, college students are under more financial stress than ever:

  • Two-thirds of students stated they cannot comfortably afford housing at their college and 34 percent said they find it challenging or impossible to afford food.
  • An Ohio State University 2017 study indicated that seven out of 10 students reported feeling stressed about their finances in general and 63 percent worry about paying for school.

The Implications of Debt Inequality

A study by the American Association of University Women (AAUW) revealed significant race and gender differences in student loan debt:

  • Women make up 56 percent of enrolled college students, but hold 65 percent of outstanding student loan debt.
  • 71 percent of women have student loan debt when graduating with bachelor’s degrees compared to 66 percent of men. 
  • Black women graduate with the most debt – at $30,400 – compared to $22,000 for white women and $19,500 for white men.

This imbalance has far-reaching implications, largely because of gender and race wage inequality.

Prudential’s 2018 Financial Wellness Census surveyed adults ages 25-70 and found:

  • 25 percent of women surveyed said they were still paying off student loan debt, compared to 18 percent of men.
  • Women reported having substantially higher loan balances than men. 
  • Only 54 percent of women said they have put aside money for retirement, reporting an average of $115,412, while 61 percent of men said they have saved an average of $202,859 for retirement. 

Read more on women and financial wellness in iGrad Executive Vice President Kris Alban’s guest post on BenefitsPRO.

Post-College Impact of Student Loan Debt

Students taking out loans likely don’t realize the long-term implications of this debt.

A December 2018 study by the nonprofit RTI International revealed that student loan debt was significantly related to employment and family formation four years after graduating.

A study by the University of Missouri released in October 2018 reveals that even when out of college, having student loan debt causes anxiety and stress.

The study showed that 55 percent of graduates with student loan debt reported being worried about their student loans. However, only 30 percent said that they had received financial education about paying off their student loans and only 40 percent reported having financial influence from their parents. 

>>> Download the full Whitepaper here: “Diplomas, Debt & Default: How Financial Wellness Helps College Student Break the Cycle.”