Running head: FINANCIAL LITERACY

Point of View Paper: Financial Literacy Responsibility Theresa Brostowitz SDAD 576 Seattle University 2/15/2014

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Point of View Paper: Financial Literacy Responsibility Introduction With an institutional obligation to increase persistence, retention, and completion, leadership in higher education must make the decision to commit to the financial literacy of incoming college students. Most students are not receiving this information at home, and they certainly are not receiving it in their K12 education. But where these students feel the full weight of their financial illiteracy is in college. Financial illiteracy, merged with low family or personal socio-economic status and rising tuition, can lead to increased rates of college drop out. In my position as a coordinator for a program for commuter and transfer students, 3 out of the 25 students I saw on a regular basis left the university this year after sharing with me information regarding their financial hardships, and I have two more struggling to finish the year and who may not return. These are only the students who have reported. I believe the actual number to be much higher. Financial Impact In a study of 614 college drop-outs, funded by the Bill and Melinda Gates Foundation, 70% of these students stated that they had to choose work over school and thus made the decision to leave college (Johnson, 2009). The same study also found that 81% of these college drop-outs believed that had parttime students been eligible for financial aid, it would have significantly increased their likelihood of obtaining a degree. College students have real and immediate financial needs, and they are not receiving information adequate to meet them. This data tells college administrators that they are losing students due to poor financial planning, a problem that could be remedied for many of these students with proactive financial education. If students must choose between paying rent or paying tuition, we all know which priority comes first based on a brief glance of Maslows hierarchy of needs. While the aforementioned research reflects a traditionally aged college population, a study of non-traditionally aged college students conducted by the Apollo Foundation came to similar conclusions. Slightly over 70% of these students attributed financial stresses to dropping out (Ritter-Wilson & Rouse,

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2012). I would like to note, however, that 75% of the students polled for this survey were white and over half (55%) had no children. I think that these are two important identities to keep in mind when interpreting the data, as financial stresses can be considerably increased for parents and individuals identifying in marginalized communities. In a national longitudinal study completed by the U.S. Bureau of Labor and Statistics, it was found that there was a positive correlation between college completion and student income (Bailey &

Dynarski, 2011). In the lowest income quartile, about 9% of students born between 1979 and 1982 were
completing college compared with a 54% completion rate by students in the top income quartile. There are large disparities in persistence as well. The same study found that the low income students persisted at a rate of 32% while the top quartile students persisted near 68%. I believe that with proactive and targeted intervention, institutions of higher education can help students make more responsible financial decisions which in turn will increase persistence and graduation rates, especially for low SES students which the data shows are at a much higher risk of dropping out. Implementation College students must be armed with the information they need to make smart financial decisions regarding their education before they choose their university and their aid is dispersed. If universities are funding an admissions department to pre-emptively market the university to college bound students, it also must take steps that will aid in their retention. If colleges and universities are losing such large numbers of students due to financial reasons, then it would greatly behoove institutions of higher education to take more responsibility for increasing financial literacy. There are several stages at which institutions can reach college-bound students before they make a large financial commitment. First, having recently worked in admissions, I have witnessed firsthand the decline of attendance at the traditional college fair. The large majority of high school students will not make time to attend a college fair and talk to a representative at a booth, especially those with obligations to work or attend to family. Where higher education institutions reach high school students is in the

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classroom. Institutions must form collaborative partnerships with high schools to provide educational opportunities for financial literacy in the classroom. This can become an integrated part of already planned and funded admissions recruiting efforts- especially in schools receiving Title IV funding. Institutions can also choose to implement financial literacy education at the application stage. Especially with online applications, institutions can create simple and effective webinars or webpages that students must navigate through in order to complete the application. If colleges and universities are concerned with the cost associated with the creation and implementation of an online financial literacy curriculum, they need look no further than organizations such the U.S. Financial Literacy & Education Commission, who sponsors MyMoney.gov, or Jump$tart.org. At a time when state funding for higher education has been significantly decreased, there are many no and low cost solutions with the potential to effectively meet this need. The latest stage at which the first wave of financial planning and literacy intervention should be implemented is during pre-matriculation academic advising. Colleges and universities can use registration holds to mandate that students complete an online or in person financial literacy and planning workshop before they register for their first term of courses. This type of wrap around advising has been successfully implemented in the University of Oregons PathwayOregon program, an advising program designed for low income Oregon residential students to help them persist and graduate within four years. In 2012, PathwayOregons senior class boasted a 74.3% retention rate from freshman year (Bowers, 2012). Conclusion Institutional leadership cannot assume that the traditional 18 year old student will take it upon themselves to voluntarily navigate the institutional website for their financial services office or even take the time to show up to an office in person. At some larger colleges and universities, with expansive campuses and long wait times to see advisors, some students may not even persevere to meet with an administrator to have their questions answered. Colleges and universities must be proactive regarding the

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dissemination of financial literacy information throughout potential and matriculated student constituencies. If institutions expect to increase the socioeconomic diversity of their campuses, they will have to be able to proactively respond to the needs of low income students and create a campus culture ready to receive and support them and where finances can be and are discussed between students, administrators, and faculty members. Colleges and universities must be honest and transparent about the financial responsibility that students will incur upon matriculation to their institution. The information provided must be foundational, unpacked, and realistic. This information should be given with the intent that the student should have the skills necessary to make responsible financial decisions after graduation and into adulthood. After all, I am sure that it is the hope of every institution of higher education that their students will persist through graduation and go out into the world as informed, responsible, and successful citizens (who will in turn donate back to the university).

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References

Bailey, M.J., & Dynarski, S.M. (2011). Gains and gaps: Changing inequality in U.S. college entry and completion. National Bureau of Economic Research. Retrieved from http://www.nber.org/papers/w17633 Bowers, C. (2012). PathwayOregon fast facts: The 2011-12 academic year in review. University of Oregon. Johnson, J. (2009, December 8). Majority of college dropouts cite financial struggles as main cause. The Washington Post. Retrieved from http://articles.washingtonpost.com/2009-1208/news/36907971_1_students-graduate-tuition-or-fees-minority-students
Ritter-Williams, D., & Rouse, R.A. (2012). To graduate or drop out? Factors affecting college

degree completion of baby boomer, generation x, and millennial students. Retrieved from The Apollo Research Institute website: http://apolloresearchinstitute.com/sites/default/files/to_graduate_or_drop_out_report_fina l_0.pdf