Coaching to create financially smart students

The case for financial wellness in higher ed

At colleges and universities across the country, intelligent, dedicated students are hard at work becoming experts in their chosen field. They tackle complicated chemistry experiments and lofty writing assignments. They create forward-thinking business plans and cutting-edge computer software. Yet surprisingly, one area they know the least about may be the subject that can have the greatest impact on their success: their own financial wellness. 

Statistically, it’s often finances — not academics — that cause a college student to drop out of school. Not having enough money to pay next semester’s tuition. Being short on the rent. Not being able to buy the bus pass needed to get to class each day. How can schools help students with financial literacy? 

Giving students the knowledge and openness to be able to talk about finances — a scary and often confusing subject — is a crucial step in creating financially fit students. Here are insights from Erin Swenson, a Success Coach at InsideTrack, on the financial topics most likely to confuse students, and the strategies institutions can use to support them.

College finances by the numbers

In a 2017 Study On Collegiate Financial Wellness from The Ohio State University Office of Student Life, more than 28,000 students at colleges and universities across the country responded to a survey about paying for school, financial behaviors and financial knowledge. Of those, 69 percent of respondents agreed or strongly agreed that they feel stressed about their personal finances. 43 percent worry about being able to pay their monthly expenses, while 63 percent worry about having enough money to pay for school. 

69 percent of respondents agreed or strongly agreed that they feel stressed about their personal finances

And this financial stress makes everything else harder. A 2018 report from the Wisconsin HOPE Lab tabulated 43,000 returned surveys from students at 66 institutions (31 community colleges, 35 four-year colleges and universities) in 20 states and the District of Columbia. 46 percent of community college students experienced housing insecurity in the last year, with 36 of their university counterparts responding the same. 36 percent of respondents were food insecure in the 30 days preceding the survey, meaning they often skipped meals and went hungry because there wasn’t enough money for food. And 9 percent of university students and 12 percent of community college students were homeless.

 46 percent of community college students experienced housing insecurity in the last year, with 36 of their university counterparts responding the same

According to the 2017 Homeless In College report, first-year students facing housing insecurities show a nearly 10 percent reduction in the probability of degree attainment or enrollment four years after initially beginning college. Studies have also shown that ongoing stress and anxiety in situations like this can lead to depression, an inability to focus (a key ability to successfully navigate college) and even higher-risk decision making — like taking out high-interest payday loans to stay afloat. 

For many students, starting college is the first time they’ve been out on their own, living independently and embarking on the new responsibility of college finances. Having a clear understanding of their financial issues — including loans, grants, tuition, rent, meals and day-to-day living expenses — allows students to focus on their education, rather than worrying about making the rent or where their next meal is coming from. 

Getting to the true cost of college

These days, long-time Coach Swenson makes financial wellness a priority.

“It’s important to give students a space to talk about their experience, ask questions and reach goals. To me, wellness is feeling comfortable, and that’s how I want students to feel about their finances.”

That “financial wellness” often begins when students are initially selecting a school. When prospective students compare costs between different colleges and universities, they’re often comparing apples to oranges. As an example, let’s say that School A has a cost of $30,000 and School B has a cost of $40,000. According to Swenson, students typically assume that School A is more affordable. 

But what happens when you factor in scholarships and grants? In this scenario, School A offers $5,000 in scholarships, bringing their total to $25,000. School B, on the other hand, offers $14,000 in scholarships plus $3,000 in grants, bringing their total to $23,000. With a clearer understanding of true financial picture, the cost of School B is now lower. Students also need to factor in the cost of living, which can have a major impact on rent, food and transportation — with higher costs in larger cities, for example.

Deciphering the FAFSA

In the world of student financial aid, all roads lead through the FAFSA — the Free Application for Federal Student Aid. As any financial aid counselor knows, filling out the FAFSA is a must in order to receive any type of federal financial aid — including grants and student loans. Yet as important and commonplace as the FAFSA is, it can be extremely confusing. And completing and submitting the online FAFSA each year is only the beginning. 

“Students don’t understand that it’s up to them to make sure their FAFSA has been correctly submitted by checking the financial aid portals at the school they’re applying to. If they receive an email requiring additional information or records, it’s incumbent on them to follow through as quickly as possible,” says Swenson. And 35 percent of students are randomly selected each year to have their FAFSA information verified. “Any holdup means there may not be money for tuition, living expenses, meal tickets and so on when school starts.”

Understanding the different types of financial aid

You wouldn’t buy a car without understanding the financing. You wouldn’t accept a job without knowing how much you were going to be paid. Yet according to a 2018 study by the ACT Center for Equity in Learning, the college entrance test organization, most high school students don’t understand the basic workings of financial aid — including scholarships, grants, work study and loans. 

One area of concern is understanding the difference between the various types of financial aid. While every student receives an award package of some kind, few know how to read it or what the terms really mean. Scholarships and grants, for example, are “free” money that don’t need to be paid back. Loans, on the other hand, have to be repaid — which is why Swenson asks questions that go below the surface. “How are you financing college? Have you submitted your FAFSA? Are there things you need to follow up on? And how confident are you that you can pay for next semester’s tuition?” are all questions that need to be asked.

The Ohio State University study also showed that 53 percent of the respondents took out student loans. Of those, almost one-third have $30,000 or more in debt, with 8 percent reporting that they don’t know how much they’ve borrowed. And nearly 20 percent indicated that they have used credit cards to pay for a portion of their college expenses. 

“I’ve spoken with many students — especially first generation students — who didn’t understand that the ‘refund’ check they received from financial aid was money they were responsible for paying back,” says Swenson. “In order for students to make informed decisions about their finances, they need to be clear on what they’re saying yes to and how that can affect them down the road.”

Dropping out can make a bad financial situation worse

Students are often surprised to learn that if they drop out of school, the loan debt doesn’t disappear. In fact, dropping out for any reason activates the six-month grace period after which the first student loan bill will arrive. According to the Office of Federal Student Aid, every year one million student borrowers default on nearly $20 billion in federal loans. 

One of the biggest misconceptions students have about their financial aid is that the funds just show up and when school starts, their tuition and other expenses will be magically taken care of. “The onus is on them to make sure paperwork is submitted, questions are answered and everything is taken care of,” says Swenson. For some without a proper financial education, finding out they neglected to submit a tax return or answer a follow-up email can prove a rude awakening on the first day of classes. 

The value of open-ended questions

For most financial aid counselors and student support staff, student interactions are primarily transactional, related to paying tuition. This, coupled with the fact that departments are often stretched to the limit by the sheer volume of students they interact with each day, means the conversation rarely extends beyond loan paperwork and housing bills. 

As a Coach, Swenson says it’s not only OK, but imperative to go deeper and ask students about everyday facets of their financial situation. To get there, she asks open-ended questions. “When you ask a student yes or no questions, you get yes or no answers,” she notes. “The house could be on fire, but they won’t let you know. When you ask open-ended questions and dig a little deeper, you get the answers below the surface and learn about the real issues they’re experiencing and challenges they’re facing.” 

Normalizing the financial aid process

Making financial aid advising more developmental and less transactional is key to making financial literacy more accessible. Many students, for instance, think of FAFSA as a bank that directly provides them with grants and loan money. They don’t understand the process and they don’t want to look foolish by asking what they perceive as “dumb” questions. By proactively giving students the information and tools they need to make smarter financial decisions, they’re better prepared to fully understand what they’re saying yes to when taking out a loan, accepting a scholarship or signing up for work study.

Swenson sees most financial aid departments as being woefully understaffed, responsible for thousands of students with a limited number of counselors. “It’s important to normalize the financial aid process, and we can do that through education. I speak with students all the time who don’t know who to talk to. They don’t know what questions to ask or they don’t understand the financial aid information they receive. In order for them to do what’s right for their situation, they need to become financially smart students.”

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