Students in Financial Crisis: How Academic Advisers Can Help
Reed T. Curtis, University of South Carolina
Editor's note: This is the eighth in a series of articles written by students enrolled in Jennifer Bloom's graduate seminar on academic advising at the University of South Carolina for the 2007 fall semester. As part of her course syllabus, Dr. Bloom required each student in her class to submit an article to The Mentor or other publications for consideration.
Given that tuition and fees at colleges and universities are rising at a pace higher than the cost of living, students face an increasingly difficult burden of funding their educational pursuits. Since the 1980s, the cost of higher education has skyrocketed; college tuition and fees have risen by 375 percent, while the average household income rose only 127 percent (Hunt et al., 2006, p. 19). According to a 2006 United States Department of Education report, Our higher education financing system is increasingly dysfunctional ... [as] state subsidies are declining, tuition is rising, and cost per student is increasing faster than inflation or family income (p. 10). This report also found that state funding of education hit a new low in 2005. All of these factors have led to unprecedented levels of debt for college graduates. King and Bannon (2002) reported that 64 percent of college students graduate with debt; 39 percent of them have debt that is deemed unmanageable. King and Bannon define unmanageable student-loan debt as a debt load that exceeds 8 percent of a graduate's pre-tax yearly income. Minorities are more likely to have an unmanageable student-loan debt. Fifty-five percent of African American and 58 percent of Hispanic graduates compared to only 37 percent of Caucasians graduated with unmanageable debt (King & Bannon, 2002).
Another indicator of the extent of this problem is that 60 percent of college students move back in with their parents after graduation, helping to define a growing trend coined as the boomerang generation (Experience Inc., 2006). Graduates' reasons for moving home after graduation vary, but 48 percent of boomerangers move home because of financial problems (Experience Inc., 2006). As The Project on Student Debt (2007) explains, the prospect of student debt can prompt students to compromise on college choice, drop out, or forego higher education altogether (p. 13). In fact, students who lack financial security are more likely to do worse in college, drop out, or even commit suicide (Johnson, 2005). The purpose of this article is to stress that strengthening financial literacy among academic advisers is now a critical aspect of working with and empowering today's college students.
Types of Student Debt
It is also important to understand that student debt is diversified and is not simply linked to student loans alone. Students are now increasingly using credit cards to cover additional college and life expenses (Johnson, 2005). In 2004, 66 percent of all first-year students already had at least one credit card before stepping foot into their first college classroom (Nellie Mae, 2005). Even more alarming is the fact that the number of credit cards students possess increases each year throughout college, with 56 percent of seniors carrying four or more cards compared to 15 percent of first-year students with four or more (Nellie Mae, 2005). Reasons for this increased student dependence on credit cards include heavy credit-card solicitation, easy access to credit cards, increased living and school expenses, and lack of financial literacy (Johnson, 2005). Credit card companies are tireless solicitors of college students despite campus regulations and other measures of prevention (Johnson, 2005). Here are just some of the issues that relate to credit card use and abuse on college campuses:
The burden of credit card debt haunts many students and can lead to a multitude of problems. A student stressed over credit card debt may suffer additional financial, psychological, and physical problems (Johnson, 2005, p.209). Because students' financial instability during college can lead to depression and suicide (Johnson, 2005), advisers should be on the lookout for warning signs and know how to effectively refer students to mental health services. Academic advisers should also be aware of the increased risks of financial instability among minorities and establish communication with the multicultural services available on campus.
- The Collection: Credit card companies participate in aggressive and emotionally abusive efforts to collect payments. This becomes a huge distraction for students who may already be struggling in school. In the face of these mounting financial pressures, some students may get additional student loans to pay their credit card bills, some take on additional jobs that reduce time for academic studies and extracurricular opportunities, some students drop out of school to earn more money, some become depressed and some of those even attempt to or do commit suicide (Johnson, 2005), and others are forced to declare bankruptcy. Bankruptcy rates tripled between 1995 to 2000 among people younger than 26 years old (Johnson, 2005).
- Stigmatization: Students feel alone in their financial crises and sometimes are too embarrassed to seek advice from others. Many do not feel comfortable telling people about their situation, because they feel that others will see them as stupid or completely irresponsible. Going to their parents may seem to be a plausible option, but many students fear their parents' anticipated disappointment and anger, and thus feel completely alone when faced with mounting bills, classroom assignments, living expenses, and expectations (Johnson, 2005).
- The Burden: In most cases, there are no easy solutions to student debt loads. Students begin to recognize the lifelong implications of their previous financial decisions. The financial situation becomes constant and requires lifestyle changes, some of which limit students' ability to academically succeed (Johnson, 2005).
As advisers, it is extremely important to have a basic understanding of the higher-education financial climate and the ways that students can obtain aid (Sutton, 2002; Moran, 2002). With the help of academic advisers, college students may be able to avoid financial disasters.
Advisers should work just as hard to encourage and instill financial literacy in advisees as they impart tips for academic success. Without financial stability, students' academic performance may decline (Johnson, 2005), their emotional and physical health can deteriorate (Norvilitis, 2003), and chances of future lifelong financial stability can be at risk (Project on Student Debt, 2007).
When students do seek information about financial resources, they often turn to the Internet, yet they do not know which sites are trustworthy (Glater, 2007). In a recent article about this matter, Jonathan D. Glater (2007) reports that searching for reliable information online is akin to shopping for a used car. Glater (2007) explains how financial advice is extremely easy to come by online but is often tainted with bias and fraud. Students must understand that finding good financial advice takes more than just Googling. For example, take a moment to type student loans in your search provider of choice. What you find might scare you.
Advisers can begin to help students deal with these financial issues by becoming acquainted with the financial aid system at their institution and by establishing a connection in the financial aid office that can serve as a resource for themselves and for their students (Sutton, 2002). Academic advisers can also help to educate themselves about financial matters by reading publications such as:
Another way advisers can educate themselves and their colleagues is to encourage the academic adviser association on campus to offer professional development opportunities on topics related to personal finance and college students.
- Johnson, C. (2005, June 1). Call to limit soliciting of credit cards on campus. NYU Journal of Legislation and Public Policy, 8(2), 191-277. http://www.law.nyu.edu/journals/legislation/articles/vol8num2/Johnson.pdf This is one of the best articles on the financial instability of college students.
- National Academic Advising Association (NACADA), Clearinghouse of Academic Advising Resources: Financial Aid Resources: http://www.nacada.ksu.edu/Clearinghouse/Links/financial.htm This site has many links to sites about financial aid and other student funding issues. As with all website resource links, take time to research the background and legitimacy of all sources before sharing with students. As NACADA explains, it does not endorse the sites and only lists them for the reader's reference.
- Orman, S. (2007). The Money Book for the Young, Fabulous & Broke. New York: Penguin Group. I strongly recommend this book to all young people and those who care about them. Full of financial knowledge and insight that addresses many of the financial issues college students face.
- The Project on Student Debt (2007, September). Student debt and the class of 2006. Berkeley, CA. The Project on Student Debt: http://projectonstudentdebt.org/files/pub/State_by_State_report_FINAL.pdf
While the financial aid office does provide financial counseling to students, many students do not realize that these services are available. Academic advisers can play a key role in helping to direct students to available services on campus. Sutton (2005) explains, Often, students begin their search for help with their academic advisors. Because of this, these students should see their academic advisers as allies they feel safe to approach and trust with any need. Advisers must explain to students that they will serve as unbiased and supportive agents in both their educational pursuits and lives. By establishing an open communication policy, students can feel comfortable to ask those questions without facing stigmatization (Johnson, 2005). While advisers may not know the solutions to all problems, they can directly support students as they pursue answers (Sutton, 2002).
Other Possible Institutional Solutions
Advisers can also advocate that the financial aid office and the institution take a more active role in educating students about the dangers and potential lifelong implications of loan debts. Higher education must recognize that students graduate from college not only with transcripts of their academic progress but also with credit scores that document their financial histories. Many students do not understand what a credit score is, why it is important to have a strong score, how to safely obtain their scores, or how to avoid fraud and protect their identities. Few of them realize the future implications of a low credit score in terms of being able to secure employment or loans for housing, cars, etc. (Johnson, 2005).
Financial aid offices have traditionally focused on scholarships, grants, and student loans. There is a real need to increase the financial literacy of students on campus. Advisers should let the financial aid office know about the concerns they are hearing from students and recommend that students receive a comprehensive set of financial literacy programs. These programs might include but are not limited to credit card and other debt management, car insurance policy counseling, health insurance education, identity theft prevention, online fraud and scam protection, credit score counseling, etc.
Initiatives and courses designed for first-year students, along with personal finance courses, should also address these and other issues head-on and should be realistic, comprehensive, and strongly recommended, if not mandatory, for all students (Johnson, 2005). Students' parents, too, should be supplied comprehensive educational resources related to these financial issues. In addition, all facets of the American educational system should take heed and develop the necessary programs to provide students a better financial understanding prior to attending college.
Increased expectations, responsibilities, and educational demands face all college students today. While the framework of their college degrees may be academic in nature, they need financial stability to make the most of their college experiences. Academic advisers have historically been an important link to help students achieve their potentials. Over time, the financial demands on students have increased to a point where many students are now focusing less on their academic goals in order to survive in a world full of debt. In response to this high-stakes financial environment, academic advisers find themselves in a unique position in which they can effectively refer students to appropriate campus services and advocate financial literacy throughout higher education. While students may face financial crises, academic advisers can serve as sources of stability, hope, and support that enable them to survive.
Experience Inc. (2006, August 15). Nearly 60% of college graduates boomerang back home after living on their own. Retrieved November 20, 2007, from http://www.experience.com/corp/press_release?id=press_release_1155590079977&channel_id=about_us&page_id=
Glater, J. (2007, November 4). Move over, Orbitz. New York Times. Retrieved November 20, 2007, from http://www.nytimes.com/2007/11/04/education/edlife/spending.html?_r=1&oref=slogin
Hunt, J. B., Jr., Carruthers, G., Callan, P. M., & Ewell, P. T. (2006). Measuring up, 2006: The national report card on higher education. National Center for Public Policy and Higher Education. Retrieved November 29, 2007, from http://measuringup.highereducation.org/_docs/2006/NationalReport_2006.pdf
Johnson, C. (2005, June 1). Call to limit soliciting of credit cards on campus. NYU Journal of Legislation and Public Policy, 8(2), 191277. Retrieved October 7, 2007, from http://www.law.nyu.edu/journals/legislation/articles/vol8num2/Johnson.pdf
King, T., & Bannon, E. (2002, March). The burden of borrowing: A report on the rising rates of student loan debt. Washington, D.C.: The State PIRGs' Higher Education Project. Retrieved November 19, 2007, from http://www.pirg.org/highered/BurdenofBorrowing.pdf
Moran, K. (2002, October 1). Grant support for graduate and undergraduate students who perform research. The Mentor: An Academic Advising Journal, 4(4). Retrieved November 20, 2007, from http://www.psu.edu/dus/mentor/
Nellie Mae Inc. (2005, May). Undergraduate students and credit cards in 2004. Braintree, MA. Retrieved November 20, 2007, from http://www.nelliemae.com/pdf/ccstudy_2005.pdf
Norvilitis, J. M., Szablicki, P. B., & Wilson, S. D. (2003). Factors influencing levels of credit card debt in college students. Journal of Applied Social Psychology, 33, pp. 935947.
The Project on Student Debt (2007, September). Student debt and the class of 2006. Berkeley, CA: The Project on Student Debt. Retrieved November 20, 2007, from http://projectonstudentdebt.org/files/pub/State_by_State_report_FINAL.pdf
Sutton, W. (2002, November 11). Knowing the facts about financial aid: Basic overview of financial aid for academic advisers. The Mentor: An Academic Advising Journal, 4(4). Retrieved November 20, 2007, from http://www.psu.edu/dus/mentor/
United States Department of Education (2006, September). A test of leadership: Charting the future of U.S. higher education. Retrieved November 28, 2007, from http://www.ed.gov/about/bdscomm/list/hiedfuture/reports/final-report.pdf
About the Author
Reed Curtis is a graduate student in the Higher Education and Student Affairs program at the University of South Carolina. He is also employed at the National Resource Center for The First-Year Experience and Students in Transition. He can be reached at firstname.lastname@example.org or 803-576-5795.
Published in The Mentor on February 27, 2008, by Penn State's Division of Undergraduate Studies
Available online at dus.psu.edu/mentor
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