Forging a Path to Financial Capability. Higher One s Commitment to and Position on Financial Literacy and Financial Capability

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1 Forging a Path to Financial Capability Higher One s Commitment to and Position on Financial Literacy and Financial Capability

2 Forging a Path to Financial CAPABILITY The purpose of this document is to define Higher One s commitment to and position on financial literacy and financial capability through the $tart With Change financial education initiative, and will cover the following points: Higher One s Commitment to Financial Capability The Increasing Importance of Financial Capability for Today s College Students Beyond Financial Literacy: Putting Knowledge to Action Exploring the Evidence: What Works, What Doesn t Bridging the Gap: Recognizing the Financial Literacy Needs of College-Bound Students Higher One s Financial Capability Goals Higher One s Outreach Efforts Through $tart With Change 2

3 Higher One s Commitment to Financial Capability Higher One believes that all college students can become financially capable when reached with the right methods of financial literacy education, and when given access to and experience with banking and financial services. The ability to manage finances can be paramount to a student s successful completion of a college degree, and the $tart With Change initiative addresses the challenges of providing students with relevant and engaging financial education opportunities through its technological product offerings and services, grant support for financial literacy programs on campuses, research sponsorships and college readiness philanthropy. Through $tart With Change, Higher One is committed to helping students make smarter everyday financial decisions that can put them in control of a successful financial future. The Increasing Importance of Financial Capability for Today s College Students Financial literacy and financial capability are of critical importance to today s college students. As the cost of higher education continues to rise, more and more students must borrow money in order to earn a degree. When added to the everyday financial decisions students must make, the amount of money students are borrowing and the complexity of the loan process means money management is part of the average college student s life more than ever before. Several studies bear this out: 71% of 2012 graduates (1.3 million students) from four-year colleges had student loan debt. (Source: Project on Student Debt, The Institute for College Access & Success, December 2013) Total debt, including loans from family and an average of $3,000 in credit card debt brought the average debt for 2013 graduates to $35,200. (Cost-Conscious College Graduates Study, Fidelity Investments, May 2013) 54% of surveyed students who left school say they did so mainly because of the stress of having to work and go to school at the same time; 31% cited the cost of tuition and fees as their main reason for dropping out. (Source: With Their Whole Lives Ahead of Them, Public Agenda for the Bill & Melinda Gates Foundation, 2009) 71 % $ 35.2k 54 % Average amount of student debt Percentage of students who left Percentage of graduates with student loan debt school because of financial stress 3

4 Beyond Financial Literacy: Putting Knowledge to Action If financial literacy is defined as having a basic financial understanding, being financially capable which should be the goal for college students is putting that knowledge into action by demonstrating sound financial decision-making in their everyday lives. For college students, financial literacy includes: Understanding the difference between grants and loans Knowing how to open, and understanding the terms of, a bank account Understanding complicated financial and related mathematical concepts (compound interest, etc.) Knowing when they require supplemental financial assistance, and where and how to obtain that assistance For college students, financial capability includes: Creating and maintaining a budget Establishing good money habits (avoiding unnecessary banking fees, paying bills on time, avoiding credit card debt, eschewing unnecessary impulse purchases, etc.) Limiting student loans to cover only essential costs Having a plan to finance their education from start to finish Establishing an emergency fund and/or savings account Exploring the Evidence: What Works, What Doesn t In measuring the effectiveness of financial literacy intervention, a recent review of 201 financial literacy studies commissioned by the National Endowment for Financial Education 1 found that there is a direct correlation between the amount and timing of financial education and its successfulness. Education provided when a financial decision is imminent has a positive influence on behavior, and the greater the number of hours of intervention, the greater the influence. This suggests that providing timely and relevant programming and other interventions throughout a person s lifetime would be most effective. For college students, this means finding appropriate teachable moments and providing repeated and focused messaging on topics that are relevant to their current situation, such as limiting student loan amounts, financing their education and simple budgeting. It also means providing better and more interactive tools that can positively influence daily decisions, such as real-time reminders of daily balances or budgets at the point of purchase. Other studies 2 also inform the debate, with promising results from programs that combine interventions and strategies, include public information campaigns and focus on financial planning. However, we must continue to develop and test new approaches to financial education in order to increase its effectiveness and ensure that it has a lasting impact. These approaches should recognize the unique challenges facing college students, as well as the varying experience levels, attitudes and behaviors that students have before coming to college. It is equally important for educators and practitioners to share effective programs and best practices with each other and policy makers, using validated research to help guide appropriate content and delivery methods. 1. Executive Summary: Examining Financial Education: How Literacy and Interventions Affect Financial Behaviors. National Endowment for Financial Education, Financial Literacy: What Works? How Could It Be More Effective? William G. Gale and Ruth Levine, Brookings Institution,

5 Higher One s Financial Capability Goals Higher One serves students on more than 1,900 campuses nationwide. Through $tart With Change, our goal is to reach 2 million students with our financial capability outreach, partnerships and other initiatives. Bridging the Gap: Recognizing the Financial Literacy Needs of College-Bound Students Money Matters on Campus, a recently released research report conducted by EverFi and underwritten by Higher One, examined the financial attitudes and behaviors of 65,000 first-year college students and found that those who received financial literacy education in high school scored significantly higher than their peers on financial knowledge questions and are more responsible when it comes to money. The results of this study show the need to start financial literacy education in the K-12 setting and continue throughout a student s college years. However, even though K-12 and college-level interventions can have a positive impact on a student s ability to become financially capable, there has been a lack of dialogue between K-12 and higher education practitioners on the issue of effective financial education interventions for college-bound and college students. With $tart With Change, Higher One is committed to supporting financial literacy initiatives that benefit college-bound students at the K-12 level as well as bringing together K-12 and higher education representatives to share best practices that bridge the gap and increase financial capability among potential in-bound college students. Higher One believes that all college students can become financially capable when reached with the right methods of financial literacy education, and when given access to and experience with banking and financial services. Higher One s Outreach Efforts Through $tart With Change $tart With Change uses a variety of channels to reach students directly and promote financial capability, including on-campus seminars for students, contests, challenges and promotions online and through social media, integration of tools and tips into our product offerings, peer-to-peer counseling, and published research. To engage and empower colleges and universities to help their own students attain financial capability, $tart With Change provides additional resources including grants, workshop collateral and other materials and assistance. Because generating interest among students in learning financial capability can be a challenge, Higher One has embedded engaging and entertaining tools, resources and incentives in the products it offers to students. These include unique account features and educational tools that help students actively learn money management and budgeting skills, mobile alerts to encourage closer attention to spending patterns, clear explanations of banking terms, simple-to-use account statements and even congratulatory messages when students make smart money choices. Through the use of our products and services, students are enhancing their financial capability in interactive and easy ways that reinforce positive behaviors. 5

6 How Start With Change Reaches Students $tart with Change Grant Program Budgeting Tools Mobile Alerts Council for Economic Education EverFi College Grants Product Integration Higher One Financial Literacy Symposium Presentations at Conferences and Events Moneythink Collaborations Thought Leadership Blogs STArt With Change $tart with Change Video Contest Financial Literacy Month Challenge Student Contests Campus- Based Learning Online Resources Publications & Toolkits Talking to Your Student About Money Money Matters On Campus DIY Presentations and Toolkits Higher One Financial Academy Workshops and Presentations Peer-to-Peer Counseling Blog and Digest StartWithChange.com 6