As a financial aid administrator, you are no stranger to the critical role that financial literacy plays in a student's overall well-being.
Statistics have shown that a significant portion of the population has poor financial literacy, with over 60% of Americans living paycheck to paycheck, and credit card and student loan debts reaching all-time highs.1
With the growing student loan debt and increasingly complex financial landscape, it's more important than ever to ensure that students have the necessary skills to navigate their financial futures confidently.
Let's explore why universities should include financial literacy as an essential part of their curriculum.
Student Loan Debt Crisis: A Wake-up Call
In the United States, student loan debt has skyrocketed to over $1.7 trillion, affecting over 44 million borrowers. The average student loan debt for the Class of 2020 was a staggering $28,950.2
This is a major burden in itself but topped with the fact that many students lack an understanding of their loan agreements and the appropriate amount of debt to take on, this issue becomes catastrophic.
By teaching financial literacy in universities, students can gain a better understanding of things like Free Application for Student Aid (FAFSA), federal grants, and scholarships.
They can also learn the differences between federal and private loans, the cost-benefit analysis of each option, and why federal loans are often more advantageous.
Financial Literacy: A Predictor of Academic Success
Research has shown that students with higher financial literacy are more likely to excel academically.
A 2016 study by the National Endowment for Financial Education (NEFE) discovered that students who participated in financial education courses exhibited an increased likelihood of graduating and demonstrated higher GPAs.3
By incorporating financial literacy into the curriculum, universities can help improve student success by helping students make smarter financial decisions, thus improving their overall academic performance.
Empowering Students for Future Financial Independence
Financial literacy is not only about managing student loan debt but also about preparing students for life after graduation.
A study conducted by Lusardi, Mitchell, and Curto (2010) revealed that young adults who received financial education in high school were more likely to invest, save for retirement, and maintain good credit scores later in life.4
The Financial Industry Regulatory Authority (FINRA) also found that individuals with higher financial literacy were more likely to spend less than their income and have a three-month emergency fund set aside.5
Teaching financial literacy in universities can help students make better financial decisions, avoid late fees, reduce credit card debt, and minimize the use of payday loans. In states where financial literacy requirements were implemented, positive outcomes like rising credit scores and falling delinquency rates were observed.1
Bridging the Financial Literacy Gap
According to a 2020 report from the TIAA Institute, only 34% of American adults could answer basic financial literacy questions correctly.6
This lack of financial knowledge disproportionately affects minority and low-income students, who are more likely to struggle with debt and have limited access to financial education resources.
By incorporating financial literacy courses into their curriculum, universities can help bridge this gap and create a more level playing field for all students.
Responding to Student Demand
Students themselves are becoming increasingly aware of the importance of financial literacy. A 2019 EVERFI survey found that 65% of college students felt unprepared to manage their finances and expressed a desire for more financial education.7
Since only 30% of children enrolled in public schools have access to financial literacy classes, there remains a significant need for these courses in higher education.
Universities can play a critical role in picking up the slack and equipping students with the knowledge and skills they need to make informed financial decisions, manage debt, save for the future, and enjoy overall better well-being.1
By implementing financial literacy courses in university curriculum, we invest not only in our students' financial futures but also in their overall quality of life and the well-being of society as a whole. It's time for universities to step up and take the lead in promoting high-quality financial literacy.
So What's Next?
As a financial aid administrator, you have the power to make a real difference in your students' lives by advocating for the inclusion of financial literacy courses.
By doing so, you'll be helping students make more informed financial decisions, excel academically, and ultimately lead more financially secure lives.
One way to effectively promote financial literacy on your campus is by partnering with a proven financial wellness platform like iGrad.
iGrad offers customized financial education programs designed specifically for schools, providing students with the tools and resources they need to navigate the complex world of personal finance.
It's not just about providing students with a well-rounded education – it's about empowering them with the knowledge they need to thrive in today's economy. By making financial literacy a priority and investing in resources like iGrad, you can help set your students on the path to a successful and financially secure future.
1 - https://www.forbes.com/sites/forbesfinancecouncil/2022/10/11/should-schools-teach-financial-literacy-classes/?sh=4ca53c6f4633
2 - https://www.federalreserve.gov/publications/2022-economic-well-being-of-us-households-in-2021-student-loans.htm
3 - https://www.nefe.org/research/research-projects/completed-research/2018/effects-of-k-12-financial-education-mandates-on-student-postsecondary-education-outcomes.aspx
4 - https://www.jstor.org/stable/23859796
5 - https://www.finra.org/investors/insights/finra-foundation-national-financial-capability-study
6 - https://www.tiaa.org/public/institute/about/news/annual-report-shows-more-adults-have-very-low-financial-literacy-detriment-financial
7 - https://everfi.com/white-papers/financial-education/2019-money-matters-report/