I Have to Pay for All This?
Institutions create financial literacy programs to help students acquire a vital life skill—managing money even after they graduate.
By Margo Vanover Porter
In addition to their required courses, students graduating from Elgin Community College in Illinois acquire a vital skill: "How to Win at Life." While participating in this game, students negotiate the financial perils of a typical graduate trying to make a paycheck last long enough to cover essentials, such as food, housing, transportation, and student loans.
To their dismay, students discover a horrifying reality: Life is not an easy game to win.
Kim Wagner, Elgin's managing director of student financial services, explains the rules. "Each student picks a career and goes through a budgeting simulation. They get their wonderful paycheck after taking out a good chunk for taxes. They go from table, to table, to table, paying for housing, transportation, and food. Soon, there is nothing left. You should see the look on their faces when they realize, 'I have to pay for all of this?'"
The game is just one feature of a multifaceted program that originated in 2009. "We could see that students were struggling financially, through our financial aid offices, advising offices, and from the feedback we got from admissions," Wagner says. "Students were really concerned about how to pay for college, how to pay their bills, and how to juggle school and family. So, student financial services got together with financial aid, student accounts, admission, and registration to put together a proposal for our president's cabinet."
Is This a Trend?
Elgin is one of many institutions-large and small, private and public-to adopt some type of financial training for students.
Dawn Taylor Owens, executive director of Denver-based College in Colorado, which was initiated by the state Department of Higher Education to promote Coloradan students' access to higher education, explains why. "Studies show college students may know how to navigate the world of studying and colleges and all they are expected to do from an academic standpoint, but they don't learn before they get to college how to manage their money. They get into college, and some take out emergency student loans. They get credit cards in the mail saying they are prequalified. Add that to any debt they may have from student loans, and they can come out of college with debt they don't know how to manage."
Rebecca L. Rose, assistant director of financial literacy and education programs, Syracuse University, Syracuse, New York, concurs that far too many members of this generation lack basic budgeting skills. "It's no secret that many students are coming to us with little to no background in money management. Anything they have learned is usually by word of mouth, the media, or their parents. Often, students look to their parents to take care of money for them."
To address that skill shortage, Syracuse in 2010 rolled out the "I Otto Know This!" financial literacy program featuring multiple components:
- Life Skills, a Web-based, self-directed program, provides students with financial information, tips, and skills in an interactive format. Rose reports more than 6,000 users have taken advantage of the service in its three-year history.
- Presentations, both group and personal, are the foundation of the program, according to Rose. She also shows three informational, short, fun videos starring Otto the Orange, the mascot for whom the program is named.
- I Otto Know This!, an electronic newsletter, covers topics such as credit, credit scores, budgets, identity theft, and saving. Issued six times a year, it is sent to 14,000 students.
- The Money Awareness Program (MAP) replaces a student's loan with a grant ... if he or she completes a financial literacy session each semester. The average grant, which varies according to need, is $5,000 to $7,000 per year, in addition to financial aid the student already receives. Since MAP's inception, the institution has paid out more than $3 million for this loan reduction program.
"Students want to be here at Syracuse University," Rose explains. "They want a degree from here, and they are exhausting all resources possible to achieve that. Unfortunately, sometimes the resources are private loans. We wanted to assist the students whom we saw were borrowing these loans, year after year after year. This is a program for sophomores, junior, and seniors. That's when we invite them in." (See sidebar, "A Student's Experience:Rich Already.")
Students Lead the Way
The student money management center at the University of North Texas, Denton, opened its doors in 2005. "During our first academic year, we served several hundred students," recalls Paul Goebel, senior director of the center. "Seven years later, at the end of the 2012 school year, we have served about 14,000 students. Today, students who are utilizing the center are a cross-section of the campus, which means freshman to seniors and postdoc. The youngest student we've met with during a coaching session was 14 and the oldest was 78."
One important aspect of the program is a dynamic Web presence, he says. "We have to get information to students that is relevant, interesting, and available when they're available, 24/7/365. What does that mean? Online."
The center also creates a very active outreach calendar each semester for students to obtain information, whether in workshops, special training, classroom presentations, or special events. "Oftentimes, other colleges will ask, 'Who comes up with your training program?'" Goebel says. "I answer, 'Students do.' They recommend the subject matter and timing of our trainings."
Network with peers to discover what financial services other institutions offer.
Because not all students learn the same way, he ensures that the center offers services that are flexible and diverse, including personal, one-on-one coaching sessions. "During the coaching sessions, students lead the discussion and identify topics they would like to talk about. Many students go to one of our workshops and get good general information they want to apply to their lives. Then they might come in and say, 'Hey, Paul, I heard about budgeting, and I'd like to create my own budget.' We'll sit down and help the student develop a personal resource relevant to his or her own situation and financial life."
When they call to schedule a coaching session, students can select whether they would like to talk with a staff counselor or peer mentor. The center currently has six peer mentors, as well as four full-time professionals, seven student workers, and one graduate assistant. For FY14, based on a student body of 36,000 students, the center receives a one-time annual investment of $9.60 per student. "Our funding comes through a portion of student fees," he says.
It's a point of pride for Goebel that the center's services are student-driven. "All of our marketing materials are designed by our students who are peer mentors," he explains. "I was approached several years ago by one of our peer mentors with a great idea for something called Facebook. I said, 'Sure.' I have to remind myself when we're developing programs we are not developing them for me-I just turned 50. We started with Facebook, and then went to Twitter. We now have several phone apps." His mentors are currently planning a blog.
According to Goebel, institutions need to help students address their money problems before they get out of control. "Often when students have crises, they withdraw. We don't want students to leave campus because they have bills they can't pay. What we're trying to do is instill new proactive skills in the lives of our students so that when they graduate they will they have the ability to become successful in their professional careers and also understand money management. What greater gift can we give to our students than financial independence?"
Since 2007, the center has also assisted about 800 students in coaching sessions that are designed to develop repayment and debt management plans for both personal and student loan debts. He estimates that the center has helped students with $8 million in debt management plans, with the average student debt of about $10,000.
He cites the recent conversation he had with a Ph.D. student in which he asked if she had calculated on paper the total amount of her growing personal loans. She said, "I don't want to think about it."
"In this day and age, there's still a stigma associated with talking about money," Goebel says. "That's a reality. They hope the debt just goes away."
Concentrating on Loan Awareness
"Financial literacy is a very big term," says Joe Weglarz, executive director, student financial services, Marist College, Poughkeepsie, New York. "We're actually focusing currently on loan awareness," although he hopes to broaden his institution's program in the future.
Surprisingly, he says, some students may have no idea they are even getting student loans. "One of the first questions we ask is, 'Do you know whether you have a student loan?' The response you get is always interesting."
In addition to a mandatory loan counseling session upon acceptance of the student loan, all nonbusiness-major students are offered a one-credit class in which money management topics are addressed. "We're really geared toward managing your student loan debt, although we touch on managing your day-to-day budget and credit cards. We understand financial literacy is becoming quite a buzzword term."
Marist also encourages personal exit interviews for graduating students with loans. Because they are voluntary, attendance can be hit or miss. "Many students are not aware of the benefits that come with a federal loan, such as forbearances and loan cancellation if they choose a career in the military or law enforcement," he says. "We try to educate them on those benefits."
Weglarz believes the institution's emphasis on loan awareness is paying off in the institution's government default rate. "It's under 2 percent, well below the national average of 4 percent for private schools. That tells us our students are getting jobs upon graduation, they're responsible, and the dots are connecting when they're paying their loans back."
Taking the Bull by the Horns
Three years ago, Southern Methodist University (SMU) in Dallas added a financial component to its wellness program, requiring all first-year students to complete a class that includes a unit on money matters.
Pat Woods, bursar and executive director of the division of enrollment services, reports that the state of Texas has mandated that state universities offer financial literacy classes for students. "It is not a requirement for private institutions," she clarifies, "but we feel like part of our responsibility for educating students is to educate them financially so when they go out in the real world they will have the skills they need. The university views this as a service we are providing to students that will help them in the future."
Cindy Castro, who has day-to-day responsibility for the program, indicates that the first question she asks during a student presentation is, "How many of you have had a financial literacy class or had your parents speak to you about budgeting and spending?" The assistant director of production support finds it hard to believe that "of the 1,200 to 1,300 students we touch every semester, less than 5 percent raise their hands."
To build the program, the SMU leaders reached out to institutions with a money management center or financial literacy component. Looking back, Castro admits that much of the initial process consisted of trial and error. "We received feedback from faculty and students after our first year of presenting financial literacy information to our students," she says. "Based on the feedback, we revamped our presentation and added more of what the students wanted."
As a result, the program now includes information on loan repayment and different Web sites, as well as materials from personal finance coach Dave Ramsey. According to Castro, students particularly enjoy classroom examples, such as, "If you borrow this much, this is what your loan repayment will be at the end of four years."
They also find fascinating a class activity in which they receive a certain amount of money on which to live. Their only requirement: "You're on your own. You aren't going to get any help."
The challenge opens their eyes, Castro emphasizes. "They realize this is what life is going to be like. The majority of our students have been living at home. They haven't had these responsibilities. The challenge is letting them see the importance of managing their money."
When observing this exercise, Woods says the room is abuzz with remarks like: "Well, we can't have cable. We don't have enough money. We're going to have to watch TV on our laptops." And "We won't be able to eat out. We're going to have to the grocery store and cook. Can you believe it?"
To keep student debt in check, the program emphasizes moderation in borrowing. "Our mantra is 'Borrow what you need, not what you can spend,'" Woods says. "That's what we want students to understand. You may be awarded the maximum amount, but if you don't need it, don't borrow that much."
Castro, who is currently repaying student loans herself, agrees. "A lot of these students don't know they can return some of their money. The response when I say that in my presentation is like a light bulb just went off. They're like, 'Oh, I don't have to take the whole amount?'"
While they agree that delivering a financial literacy program can be worthwhile, business officers can't reach a consensus on just what one should look like ... and for good reason. "I don't know that there is a one-size-fits-all," Woods says. "You have to tailor the program to your university."
Goebel insists that instructional methods must vary according to your student population. "We have students who are fully responsible for personal finances and are paying their way through college, to the other end of the spectrum—students who don't have to worry about money at all during college—and everything in between. When it comes to money management and financial literacy, you cannot treat the entire student body as one big square peg and provide one model. Our students today have an incredible diversity of skills and abilities."
For institutions just starting a program, he suggests networking with peers to discover what services other institutions are offering. He has a favorite saying, "Don't reinvent the wheel when you can steal the whole cart," which sums up his attitude toward borrowing and implementing ideas that have been tried and proven to work. He also advises seeking out colleagues in other departments, counselors, faculty members, and administrators on your own campus who share your vision.
Wagner seconds that concept. "We can't do this alone," she says. "There's no way any college can have a successful financial literacy program without maximizing the services they have right there at their fingertips. A financial literacy program cannot live in a bubble."
MARGO VANOVER PORTER, Locust Grove, Virginia, covers higher education business issues for Business Officer.