Exposure to financial literacy programs in college lead students to be more proficient at managing their finances and can lead to lower rates of maximum borrowing, according to a recent iGrad survey of financial aid administrators.
The survey of nearly 300 aid administrators examined the financial literacy efforts, and whether student participation is mandatory, at a variety of institution types, including for-profit, non-profit, community college, and graduate schools. The results show that for-profit schools “appear to be taking a more proactive role” in students’ financial literacy, with 61 percent of the sectors surveyed aid administrators reporting they have a financial literacy program in place. Only 34 percent of non-profit and 25 percent of community college aid administrators reported having a program.
Just over 57 percent of graduate schools reported that they mandate their students participate in a financial literacy program, the largest of all the surveyed sectors. Community colleges were the least likely to mandate participation at just over 11 percent.
One significant finding of the survey was that students on campuses with financial literacy programs are less likely to borrow the maximum amount of student loans awarded at least half of the time when compared to campuses without financial literacy programs, 17.3 percent to 12.6 percent. Students at schools with financial literacy programs were reported to be more financially proficient in areas like money management, investing, identity theft issues, and financial aid.
Whether or not program participation is mandatory did not significantly alter a student’s proficiency, which “may suggest that a compelling intervention point remains more important than whether or not the intervention is compulsory,” iGrad reports.
Budget constraints was cited as one of the largest barriers to providing financial literacy on campus, as well as a lack of buy-in across the campus and the issue not being a priority for the school’s leadership. Many administrators also cited an already “overwhelmed” aid office as a barrier to starting a program.
“In fact,” iGrad says in the survey analysis, “at many schools it is often an especially passionate staff member who is coordinating financial literacy programming on top of an already full job description and without compensation of the support budget dollars.”
When examining the characteristics of successful programs, the survey found that schools with “a highly supported and sustainable” program often also have a financial literacy task force comprised of cross-campus personnel, including campus leadership, students, faculty, and staff from the aid, student affairs, admissions, and career services offices. According to the survey results, schools where over 30 percent of students utilized the available programs were more likely to have a task force dedicated to financial literacy than schools with lower rates of student participation, 52.9 percent and 31.3 percent, respectively. In addition, schools with financial literacy task forces and programs in place are twice as likely to have their programs supported by institutional funds.
Interestingly, aid administrators at schools with task forces rated their own knowledge of personal finance issues higher than their counterparts at schools without task forces, with the exception of financial aid, which saw no significant difference between the groups.
This difference “may reflect administrators’ participation in said activities and subsequent knowledge gain in various topic areas,” according to the analysis. “The scores may also reflect participation in a financial literacy taskforce and thus a greater feeling of ownership of financial literacy efforts on campus.”
The survey is the first of its kind, looking at the relationship between student loans and institutional guidance, according to iGrad. The results of the survey “send a clear message to college officials about where the needs lie” and show officials “how they can increase positive outcomes,” iGrad Vice President Kris Alban said in a press release.
Publication Date: 10/6/2014