Many students lack crucial financial literacy.
Although college students have many financial aid options available to them, new research from America's Promise Alliance shows that a lack of transparency and simplicity in the application process can make paying for an associate's or bachelor's degree more difficult. At the same time, many students show poor spending habits, which experts say could come back to haunt them when they must repay their loans.
A Lack of Information
The report is based on a discussion group comprised of 23 students, college financial aid advisers, high school counselors, researchers and business professionals. In analyzing the conversation, the alliance found that many participants were worried about how much information on financial aid is available to students and their parents in both high school and college.
High schoolers in particular tend to spend much of their time focusing on how they can get into their dream school, the report states. They frequently do not even think about financial aid until they are accepted and discover they cannot afford to attend their choice college.
"... The lack of upfront information about costs can set successful applicants up for a devastating dose of reality," the report states.
Unfortunately, college students can be equally as confused about what exactly they need to know about financial aid. For example, the report states that some students are shocked that their financial aid package can shrink between freshman and sophomore year.
"All too often, people believe access is addressed when kids get into school," said an executive from a nonprofit focused on college access for low-income and minority students, as quoted by the report. "Too many students drop out after just one semester or one year because they lack the financial means to continue."
Poor Financial Habits
Other recent studies have indicated that college students tend to have poor financial literacy. For instance, a new survey conducted by EverFi and sponsored by Higher One shows that 24% of college students feel others would be "horrified" if they saw their spending habits. An additional 20% said they have purchased items that they could not afford, while 60% said it is OK to have an overdraft fee if they could pay it off. However, despite these bad habits, almost 80% of students said they are worried about debt.
As students now graduate with more debt than ever, Steven Bahls, president of Illinois' Augustana College, said these facts should be alarming to schools.
"Colleges and universities - especially those enrolling greater numbers of first-generation students than ever before - have an obligation to improve financial literacy and increase positive financial outcomes for our students," Bahls said in a statement. "As leaders concerned with transparency, accountability and access, our primary and time-honored concerns are to educate the whole person, which must include students' financial health."