Financially Illiterate College Borrowers Drop Out at 30% Rate
It's a fast-growing problem, as student loan debt has doubled since 2007, according to Kansas State University, and a problem colleges and universities don't seem to be addressing.
"Financial issues are one of the top reasons, if not the No. 1 reason, that students drop out of college," says Sonya Britt, associate professor of family studies and human services at Kansas State's College of Human Ecology. "Thirty percent of students who have student loans drop out of college, which is a pretty alarming percentage."
In their research report, Financial Literacy in Higher Education: The Most Successful Models and Methods for Gaining Traction, Britt and Dottie Durband, director of the university's School of Family Studies and Human Services, note that the vast majority of U.S. colleges don't have a financial literacy program.Read More: 3 College Funding Methods You Should Steal From the Rich Such programs could go a long way in helping college students understand the impact loan debt has on their lives and help them get, manage and pay off those loans more quickly and efficiently. "Most of the students who enter college don't get financial literacy courses when they're in high school, so many students aren't familiar with basic money management skills such as making payments and the awareness of how fast credit card debt accumulates," Britt says. "There's a lot of need but not a lot of resources for college students." KSU offers free financial education for students and adds a customized personal financial program. The best such college programs have those services and offer interactive online programs, classroom education and one-on-one counseling. Yet even stripped-down, basic financial education programs could help, Britt says. Read More: Here’s What College Students Are Spending On at School "Universities could offer one-time events or monthly events where they bring in professionals that could give pro bono advice to students," she says. "They also could promote a number of free resources already available to students." To help students manage their loan situations better and more directly, Britt advises getting ahead of the issue by getting information on what loan amounts are owed and what you'll have to earn to pay them back. "Use the U.S. Bureau of Labor Statistics website to determine the salary of your desired job after college," Britt said. "Then use the online calculator to estimate what your monthly payments will be based on the amount of student loans borrowed. This will give you a better idea of how much those student loans will cost you in the long run."
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