Money Doesn t Grow on Trees: A Comprehensive Model to Address Financial Literacy Education

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1 Money Doesn t Grow on Trees: A Comprehensive Model to Address Financial Literacy Education By Ellen Richter-Norgel, Director of Student Retention, Donna Hauer, Director of Multicultural and International Programs & Services, Trudy Landgren, Assistant Professor, Family and Consumer Sciences, and Jennie Robinson Kloos, Director of Institutional Research Planning and Assessment, St. Catherine University. Today s students are living in a culture of debt. A recent study indicates that the number one reason for students leaving college is debt and financial stress, followed by poor academic performance and poor social fit (Hoffman, McKenzie, & Paris, 2008; Chiang, 2007). We know that students today are entering college with a higher dependence on borrowing. As noted in The Project on Student Debt, Class of 2008, there was a 6 percent increase in the average student loan debt of graduating seniors between 2006 and However, these same graduates entered the job market with starting salaries that rose only 3 percent in this same time period. It is now estimated that the average student debt for obtaining a four year degree is $21,900. Added to the large student loans, our students today are also accumulating large credit card debt. According to the 2009 SallieMae national report on student credit card usage, 84 percent of undergraduates now carry at least one credit card (an increase from 74 percent in 2004) (SallieMae, 2009). The average balance being carried is $3,173 while graduating seniors average $4,100. This same study reported that 30 percent of students are now paying for their tuition, books, and fees with credit cards, with an average of $2,200 in addition to incurring high interest rates. The consequences of carrying large debt can negatively impact students ability to persist. Students may find themselves working more hours, or dropping out or stopping out to pay off unresolved tuition bills. Many students have registration holds, or worse, have accounts sent to a collections agency which can add up to 40 percent to their debt. Twenty-two percent of college graduates report that their level of debt has forced them to accept positions they would not ordinarily pursue and another 29 percent put off obtaining advanced degrees (USA Today, 2006). Even more startling are the number of students who drop out with a large debt: returning to complete their degree becomes an unfulfilled dream. For students graduating with unmanaged debt, there is the additional burden of knowing their credit scores will influence the interest rates on the car loan they obtain, whether they can get apartments, obtain their jobs of choice or eventually, qualify for home mortgages. The stakes are high. In fact, some have argued the level of financial illiteracy and unmanaged debt needs to be viewed as a public health issue. The need for financial literacy has never been greater. It was projected that 1.5 million college students will drop out in due to financial pressures (Pratt Financial Group, 2008). While 76 percent of college students indicate that they wish they had more help in preparing for their financial future, only one in five students claims to be very well prepared for managing their money on campus (Hartford Financial Services Group, 2006). Considering that the personal savings rate in the U.S reached the lowest point in 2005 since the Depression at minus 0.5, (although now rising) families too, may be unprepared for the

2 Page 2 financial management needed to utilize scare resources wisely (Bureau of Economic Analysis, 2009). It is clear that student development practitioners must respond to the lack of financial literacy needs. While directing students to financial aid offices may be a likely referral, the services provided through financial literacy respond to different needs. Financial literacy needs to be part of the portfolio of services offered by student affairs. St. Catherine University (SCU), with campuses in St. Paul and Minneapolis, Minnesota, has been developing a response program to these issues for the past two years. Our 5,201 students earn associate, baccalaureate, master s, and doctoral degrees, with 3,727 students earning undergraduate degrees. Our undergraduate baccalaureate college enrolls women only. While proud of our diverse campus where 25 percent of our undergraduates are of color, 28 percent are first generation, and 17 percent are parents, the complexity of these populations invited us to imagine creative and comprehensive ways to address their diverse needs. First-generation students are especially at risk as their parents may lack the understanding of the nuances of financing a college education. After learning about the Financial Money Management Center developed by Paul Goebel and staff at the University of North Texas in Denton, a group of committed SCU faculty and staff formed out of Enrollment Management. We obtained generous grants from GE Money and ING and launched our program. Strategic Partnerships for Program Success In developing our program, we believed that a broad-based partnership was crucial for program success. The make-up of this partnership has insured a wider comprehension of the issues as well agreement on a comprehensive response network. Committee members include staff from Student Accounts, Office of Research, Planning and Assessment, Student Employment, Residential Life, Graduate Admission, Academic Advising, Multicultural and International Programs and Services, Student Parent Services, and Student Retention, as well as a faculty member from Family Consumer Sciences. Comprehensive Model: Money Doesn t Grow On Trees One of the goals of our program has been to develop a culture that encourages students to talk about their beliefs and behaviors concerning money, as well as how to tackle financial problems when they encounter them. Our program, Money Doesn t Grow on Trees, include courses, speakers, web resources as well as personal financial counseling. While an upper division course entitled Personal and Family Financial Management has been a course requirement of our family consumers science majors, planners believed that a more developmentally appropriate course was needed to reach first year and sophomore students. A two credit course, entitled Personal Financial Fitness, is now being offered. Additionally, our program offers a free, year-long, speaker series that includes topics that are titled: Basic Budgeting, The Seduction of Credit Cards, Identity Theft, Credit Reports and Credit Scores, Renting vs Owning a Home, Demystifying the Financial Aid Process,

3 Page 3 Everything You Need to Know about Auto and Life Insurance, to name a few. A panel presentation titled Living Simply and a related contest in which students created You Tube presentations on how to live more simply was a program highlight from this past spring. Keynote speakers have included Nathan Dungan, a national speaker and founder of Share, Save, Spend, an organization dedicated to help youth and adults achieve what Dungan formally labels Financial Sanity. His style resonates well with college students, and he makes a clear, impressive points about the impact of our hyper-consumption society, needs verses wants, and how students can develop a balance between spending, saving and sharing. Ruth Hayden, another nationally recognized speaker, educator and author, delivered a strong address about women and money, the psychology of spending, and the need for women to develop sound money management skills. And this past year, the university partnered with Lutheran Social Services to have certified financial counselors on campus each week to meet individually with students to discuss their financial issues. This service provides individual, confidential assistance in budget planning and debt management. We are especially excited that this assists students beyond the scope of what professional financial aid officers can provide. To reach as many students as possible, the program also includes a Money Management website in which students can obtain financial information at anytime and be directed to appropriate resources both on and off campus. Data driven The Office of Student Retention has been using the Noel Levitz Retention Management System/College Student Inventory (RMS/CSI) consistently since While SCU has used the CSI as an early intervention tool for identifying students at risk for attrition, we have gained a special appreciation for the financial security scale and openness to obtain financial guidance in light of our recent work. Our data indicates, for example, that half of our first year class for the 2008 and 2007 cohorts fall far below the national average on their sense of financial security. Whereas the national average for this scale is at the 50 th percentile, half of these incoming classes have scored on average at the 18.5 and 17 percentile respectively. Our term-to-term persistence and first-to-second-year retention data indicate that students who leave our institution do so for primarily financial reasons, (trumping poor fit, or academic program not offered).with this in mind, faculty advisors are trained to watch for scales paired with sense of financial security, in particular family emotional support. This attention is critical for our first generation student population. Our academic advisor training now includes special focus on these scales and a heightened urgency to address the student s financial concerns. Understanding and Targeting Student Populations with the CSI Institutional Data The CSI institutional report (Summary and Planning Report) has been instrumental in helping us understand the needs of specific populations within our first-year class. Separating out conditionally admitted students from those regularly admitted and honors

4 Page 4 students provides invaluable insights to the differences in profile scores as well as needs. For example, we know that our conditional admitted students score significantly lower on sense of financial security than our regularly admitted and honors students, but they also score higher on their receptivity to financial guidance. The new Summary Observations With Receptivity Report enables us to work with the data, i.e. filtering students with high receptivity to financial guidance, with ease. During the CSI interpretative discussions, advisors have a starting place to begin transparent, honest discussions about specific issues regarding financial security and all that it means to the student. Furthermore, advisors can then make thoughtful and direct referrals to our two credit course, Financial Fitness or obtain financial counseling. In a recent survey conducted on campus to discern the financial concerns of our students, 53 percent of the respondents believed either their financial situation could get out of control at times and causes stress or that it was completely out of control and causing enormous stress. This type of data, coupled with institutional persistence data and the Noel Levitz profile data has enabled the university to gain a clear understanding of student needs. These data have also contributed to our ability to successfully secure our current and future grant funding for expanding our work. Evaluation: Changes in Student Behaviors, Attitudes and Knowledge Program evaluations have indicated that student behavior and attitudes have been positively impacted by program components. Ninety-eight percent of the respondents indicated they are more mindful of how they spend money; 97.3 percent indicated that they are more conscientious about living within their means and have developed an awareness of the distinctions between wants and needs, with their spending habits changing as a result. Ninety-seven percent indicated that they have become more conscientious about paying bills on time. Other behaviors that were identified as being influenced includes tracking expenses, reading contracts more carefully, developing a budget and being more mindful of saving and sharing their money. Future Plans Our program Money Doesn t Grow on Trees includes a long term vision of developing a Financial Management Center for Students. We hope to fully realize this goal within the next two years. The overall goals for this center include the following: Vision: For students to possess and realize personal financial management skills that contribute to purposeful, life-long learning. Mission: The Financial Management Center for Students provides comprehensive information and resources for students at St. Catherine University to teach life skills of personal finance and money management. The center works with all students at the university, to provide education and resources that will enable them to finance their education, learn how to establish and manage credit, plan for expenses during and after college, graduate with a plan for repaying debt and understand the call for philanthropy.

5 Page 5 In the coming year, we are excited to implement a peer money management mentor program and to widen our marketing efforts to include all university community members, alumnae, and even parents of our students. Additionally, we plan to address financial issues that are a direct outcome of the current economy, such as job and home loss, and the continued concern for unmanaged debt. Ultimately, our goal is to institutionalize the Financial Management Center and program without reliance on grant funding so that financial literacy services are embedded as an integral program of student affairs within the university.

6 Page 6 References Bureau of Economic Analysis, (May 2009). Personal income and outlays. Retrieved July 29, 2009 from Chiang, L. (4 th quarter, 2007) Q Statistics on College Student Drop Out Rates. Retrieved September, 2008 from -Drop-Out- Rates.htm. Fetterman, M. and Barbara Hansen. Young people struggle to deal with kiss of debt. USA Today. 11/22/2006. Retrieved September 11, 2008 from Harris Interactive. One-Third of College Upperclassmen Admit Being Financially Unprepared As Freshmen. 10/23/2006. Retrieved September, 2009 from Hoffman, M. J., McKenzie, K. S., & Paris, S. (2008). Paper or Plastic? CPA s Can Educate College Students on Responsible Credit Card Use. The CPA Journal, The Hartford Financial Services Group, Inc. New Survey by The Hartford Reveals Financial Literacy Communication Gap Among College Students and Parents. February Retrieved September, 2009 from The Project on Student Debt. (October 2008). Student Debt and the Class of Retrieved January 4, 2009 from Pratt Financial Group. 1.5 Million College Students Expected to Drop Out in 2008 Due to Financial Pressure. Retrieved on September 8, 2008 from SallieMae. How undergraduate students use credit cards: SallieMae s national study of usage Rates and trends, Retrieved July 27, 2009 from &sid=122cb4bc4d98.