Financial aid professionals have long realized that a key component
of their jobs is to provide students with the money management
skills needed to make it through school and beyond.
However, new research shows that instituting financial literacy
counseling programs on campuses is critically important because
a vast number of today’s high school graduates
are heading to college with very little concept, if any, of
how to manage money.
The latest test administered to high school seniors by the
Jump$tart Coalition for Personal Financial Literacy actually
showed a worsening problem. In the most recent test administered
in 2007 to more than 6,800 high school seniors in 40 states,
only 48 percent responded correctly to basic financial questions.
In 1997, when the test was first administered, 57 percent answered
correctly.
The Jump$tart Coalition test showed that the majority of high
school seniors fail to grasp even the most basic of financial
concepts. For example, only 42 percent understood that sales
tax actually adds to the cost of a purchase. Less than 49 percent
correctly said that someone who pays the minimum amount on a
credit card will pay more in finance charges than someone who
pays the entire balance.
Laura Levine, executive director of Jump$tart, said that research
shows that the young age of those surveyed is but one factor
in their inability to grasp basic money management concepts.
She said that problem-solving skills are also important in their
ability to understand and apply financial information.
The data poses a serious concern for financial aid professionals
who are scrambling to establish or expand on-campus financial
literacy programs. Financial aid offices regularly field questions
on a variety of rudimentary financial skills, including how
to budget or how to build good credit. And a growing number
of financial aid officers have begun connecting financial literacy
with a student’s long-term ability to thrive in college
and in a career.
Paul Goebel, director of the Student Money Management Center
at the University of North Texas, said the majority of college
students carry loan debt that will extend for years after graduation.
Learning to properly manage that debt also prepares students
for life’s important long-term decisions.
“Research has shown that as debt from the college years
increases, graduates postpone major life milestones including
marriage, home ownership, even children,” he said.
The most effective financial literacy counseling involves assessing
an individual student’s financial skills. The key is to
remind students that there must be a commitment — whether
in time, money, or lifestyle change — to succeed financially.
More colleges are now offering financial counseling services
to students, or even requiring mandatory courses on academic
skills and money management. These services are very timely,
considering that student loan debt has doubled over the last
decade.
Many incoming freshmen quickly realize that financial aid usually
does not cover all of their college and living expenses, and
that working part time may not necessarily offset extra costs.
That’s the point where students can take the first step
to becoming independent money managers, especially if helped
along by financial literacy counseling services on campus.
