Page 27 - index

Improving

Financial

Literacy

Steve Bean, Deborah Mayne, Aarin Distad, and Alex Kromminga

While the increasing cost of higher education is a well-known Student
fnancial aid. Even when default rates are low, fnancial aid
trend, the associated escalation in student loan debt ofen is ofces ofen struggle with a basic tension inherent in the loan
recognized too late by students. For the frst time in United program. On one hand, as an entitlement program, federal loans
States history, student loans accounted for more national debt are available to students who meet basic eligibility criteria. On
in the United States than did credit cards in 2011. In a recent the other, the government expects accountability from colleges
msnbc report, Chatterjee (2014) reports that student marketing whose students borrow (Burdman, 2012).
company Edvisors calculates that the average 2014 graduate will Tese troubling statistics and other fnancial issues afecting
have nearly $33,000 in debt, almost 60% of all college students student success are prompting many institutions within the
having taken out a student loan. And because the debt burden Minnesota State Colleges and University System (MnSCU),
has risen signifcantly faster than infation (up 361.3% since 2003 specifcally Saint Paul College, to explore a variety of fnancial
according to the New York Federal Reserve), total student debt in literacy interventions. Tis led to the research into what
the United States is now almost $1.2 trillion (Chatterjee, 2014). resources currently exist that could be integrated into existing
Not surprisingly, students are also defaulting on education programs on their campus.
loans in record numbers. In fact, “the percentage of borrowers
defaulting on federal student loans within two years of starting DEFINING FINANCIAL LITERACY
repayment has increased for the sixth year in a row, while the Te Jump$tart Coalition defnes fnancial literacy as “the ability
rate for defaults measured over a three-year period has risen to use knowledge and skills to manage one’s fnancial resources
by a similar margin” (Tomason & Newman, 2013). Te latest efectively for a lifetime of fnancial security” (Looney, 2011).
two-year default rate of 10% was the highest rate in nearly Similarly, the Financial Literacy and Education Commission
two decades, up from 9.1% among the previous year’s cohort (FLEC) describes it as having “the information, education and
(Tomason & Newman, 2013). tools that [the American public] need to make good fnancial
Colleges and universities share in the consequences. Post- decisions in an increasingly complex U.S. and global fnancial
secondary institutions with high student loan default rates are system” (Looney, 2011).
at risk of losing Title IV status, which allows for participation Te President’s Advisory Council on Financial Literacy
in fnancial support programs like the Pell grant and federal
LEADERSHIP Vol. 20.3 Winter 2015 27

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