In spite of having some of the best colleges in the world, the United States still falls short when it comes to financial literacy, ranking 14th behind other developed nations. 30% of adults with a mortgage in the United States are unable to perform basic interest calculations on their loan payments and only five states require high school students to take a stand-alone personal finance course. Colleges and universities have stepped up to address this need and more institutions are providing their students with on-campus financial literacy courses. If your school doesn’t yet offer this added service to its student body, there are powerful arguments in favor of doing so.
Reduce your default and delinquency rates
Students who understand personal finance and how to manage their money are far less likely to let their obligations slide. A student with a reasonable budget and understanding of loan terms will build their repayments into their monthly expenses. This, in turn, helps your students be more confident and knowledgeable about tackling their loans post-graduation.
The student debt landscape is constantly changing
College costs continue to grow, and there aren’t many signs that growth is slowing. Moreover, as the Perkins loan program comes to a close, more students will likely turn to a patchwork of private loans to fund their education, each with different repayment terms. This means it’s more vital than ever for students to be prepared to manage their obligations once they finish their schooling. Students must understand before they sign the promissory note how each loan will impact their future and how – or if – they can afford it.
Reinforces the idea that your students matter to you
In the crowded marketplace, having a differentiator like an on-campus financial literacy course can separate your school from others competing for a student’s attention. Offering extensive but practical financial literacy resources tells your students that their institution is doing everything it can to get them ready for the real world. Financially literate students are more likely to not only pay off their debts, but also establish long-term goals, like saving for a home or a comfortable retirement.
As you contemplate how on-campus financial literacy courses will best meet your students’ needs, keep this in mind: the classes you offer must be comprehensive to be effective. The most common criticism of personal finance courses is that they simply go over terms of the loan or student financial agreement, rather than providing real-world understanding of money management. To be useful, your financial literacy course must examine everyday financial issues, like creating and balancing a budget, managing a line of credit, and protecting their credit bureau scores.
Unpacking the reasons for our country’s lack of financial literacy can be challenging and solving the issue will take time. But the arguments in favor of addressing it are undeniable. Improving your students’ financial literacy has a profound impact on their ability to become successful, self-sufficient adults.