My husband and I started college in the middle of the pandemic, a time of great economic distress. At the time, we didn’t have any savings. We didn’t know if we’d be studying online or on campus. We didn’t have high-paying jobs or families helping us with tuition. But we did have one tool that gave us a significant advantage. That tool was financial literacy.
We weren’t in the majority. The average American college student is not prepared enough for the financial burdens connected to higher education. While lower tuition and asking the government to pay for college would make things easy, this financial help would be like feeding students the proverbial fish for four years. Many students would benefit more from learning financial literacy in college.
Nationwide, colleges aren’t doing enough to teach this. According to a study by College Pulse Insights (2022), 92% of colleges don’t require a financial literacy class or program. Nearly half of students don’t even know what kind of financial resources their school offers (College Pulse Insights, 2022).
The average cost of just one year of higher education is over $35,000. For in-state tuition, the number drops to about $25,400 (Hanson, 2022). Even with the discounted in-state tuition, that’s over $100,000 for a four-year degree. Since most people take five or more years to finish their bachelor’s degree, the number keeps climbing.
It’s insane that kids coming out of high school are offered that kind of financial responsibility without any training. Their education is probably the second most expensive thing they’ll ever buy, behind a house. But a house loan requires a two-year work history, a good credit score, a qualifying debt-to-income ratio, and a down payment. Meanwhile, enormous loans are given to eighteen-year-olds with no history of managing money.
How is such a student set up for financial success? Are students who can’t manage money able to consider the return on investment of their education? Would they have the skills to look for cheaper alternatives? Are they able to balance a budget enough to make ends meet?
The research says no. The average student is not prepared for this kind of responsibility. College Pulse Insights (2022) found that half who take out loans don’t know what their monthly payment will be when they graduate. More than half of all students have no budget, and a third don’t have savings accounts. More than a third don’t have a job. At least 14% even have unnecessary debt that’s not related to school, including car payments (College Pulse Insights, 2022).
Many don’t know that this is an issue. In the words of one student, “Finances aren’t really a priority when I think about education.”
Some students are deeply burdened by a lack of control of finances. In the United States, a quarter of students have experienced food insecurities, and 1 in 5 have experienced housing insecurities (College Pulse Insights, 2022). When you add this kind of distress on top of all the other stressors of higher education, it’s no wonder that so many students don’t finish their degrees.
I don’t think that universities are unaware of this problem. They need to do more to make sure their students are set up for success in school and going forward. This involves making sure students have the proper training to become financially literate. This might be a module in their college success course. It could even be a required class for incoming freshmen.
Some would say that these principles should be taught before students enter college. Parents and high schools should take an active role. Kids should also be told about trade schools, community colleges, certifications, and other affordable options for higher education. While that is true, it is simply not the reality right now. The easiest first step to take in raising a financially literate generation is to make sure that our colleges are preparing students to manage their money well.
If more students are not taught financial principles, then our schools will train a workforce that is a slave to money. Let’s free more students from burdens by teaching them financial literacy at a time when they need the most help with money. And let us call on the institutions that are taking the lead in the education of young adults, to lead the way.
References
College Pulse Insights. (2022). Financial Wellness [Data file]. Retrieved from https://insights.collegepulse.com/vault/survey/61f418e385a45b06fb574ccf?token=eyJ0eXAiOiJKV1QiLCJhbGciOiJIUzI1NiJ9.eyJpc3MiOiI2MjE3ZTUzOGIzNjgxYzAwMTM2ZDExYTZDExYTMiLCJle1MDk3MzMxNzY1MTJ9.Ka_mxXvVgAvbx4t-zudaK2m5fhVxt_zFyxMjf3Brp5Q&submissionGuid=8e168e32-56b4-46ea-bac9-b00550140935
Hanson, M. (2022, March 29). Average cost of college [2022]: Yearly tuition + expenses. Education Data Initiative. Retrieved May 13, 2022, from https://educationdata.org/average-cost-of-college