Many colleges and universities have begun offering some sort of financial literacy program to their students as a response to the student loan crisis and increasing student financial stress. Without a doubt, students need help.
Currently, 43.4 million Americans owe $1.749 trillion in student loans1.
Unfortunately, studies show that when it comes to understanding student loans, many students sign on the dotted line without a real understanding of their loans.
A College Ave study2 found that:
- Over one-third of students do not understand their student loan terms
- 7 out of 10 students do not know what their payment will be after graduation
Additionally, students don’t know when interest begins accruing, how much interest they will pay, when repayment starts, or that repayment is not based on income.
Due to this lack of information and understanding, almost half (49%) of student borrowers do not feel they will be able to repay their loans.
Student financial stress is also high. Studies have found that nearly six out of ten college students have cried about the cost of college and almost half have considered dropping out due to these financial concerns3.
However, students are not just stressed about their loans. They also worry about paying monthly expenses and saving for an emergency4.
Finally, not all your students are in the same stage of life – or the same stage of their financial journey.
A segment of your population may already be married, have children, own a home, take care of parents, or are even heading toward retirement.
Does your financial wellness program help your entire student population and effectively move them through the four stages of financial wellbeing?
Stage 1: Security
Most student financial wellness programs focus on this stage assuming that students are living paycheck-to-paycheck or semester to semester.
The assumption that students are focused mainly on daily needs means that financial wellness programs almost exclusively help students understand budgeting and debt management, including student loan information.
Students in this financial wellness stage need to learn about financial topics so that financial issues don’t throw them off track. They will also need help forming strong habits, including:
- Creating a budget
- Following a budget
- Determining when debt makes sense and when it doesn’t
- Paying off credit cards each month
- Paying bills on time
- Establishing credit
- Improving credit score
Providing information and helping students establish strong financial habits will help them feel less stressed and overwhelmed about their financial decisions.
Keep Reading: The 25 Most Common Financial Questions College Students Are Asking
Taking financial personality assessments and creating a budget – like those found in the iGrad program – should just be a starting point, not the end of a student financial wellness program.
Stage 2: Foundation
In this stage of financial wellness, students understand their daily needs and have developed the right skills to meet those needs. It is now time to start thinking about the future.
A student financial program should help students learn how to:
- Set financial goals
- Prioritize goals
- Save for goals
- Understand investing to gain a basic knowledge
- Understand how insurance can be used to meet financial goals
Programs like iGrad offer courses on things like creating a financial plan, investing to build wealth, career development, and assessing insurance needs.
Students will also find tools like a savings growth calculator, saving for a goal calculator, and pay down debt or invest calculator helpful as they navigate this stage.
Stage 3: Growth
In the growth stage, students have established their financial goals and are doing what they can to reach their goals.
A large portion of your student population will not be in this stage while in college. However, you might have non-traditional students that need help in the growth stage, as well as employees and alumni.
At this stage, students will be learning about:
- Different investment vehicles
- Assessing investment risk
- How to maximize asset growth
- Reprioritization of goals depending on current life stage
Stage 4: Freedom
Helping your students get through the first three stages of financial wellbeing will help them eventually arrive at the final stage. In this stage, students will meet their financial goals and transition from work to retirement.
In the freedom stage, students will need to learn about:
- Retirement income
- Estate planning
- Social Security income
A student financial wellness program should be holistic enough to meet students wherever they are and help them move from one stage of financial wellbeing to the next. That means finding a program that focuses on more than student loans and budgeting, allowing each student a personalized experience.
Colleges and universities that help students move from financial chaos to financial health have a student population with less financial stress. This translates to students who are more engaged in class, get better grades, and graduate on time.
1 - https://educationdata.org/student-loan-debt-statistics
2 - https://www.collegeavestudentloans.com/press/college-ave-student-loans-survey-finds-only-half-of-college-students-that-borrow-student-loans-feel-confident-they-can-repay/
3 - https://studentloanhero.com/featured/college-students-dont-know-fafsa/
4 - https://grad.arizona.edu/gradcouncil/sites/default/files/minutes/financialstressreport.pdf
