collage of money, charts, student working and graduating

Stay the Course

First, thank you for your kind comments to Ryan Law, our new Director of our Office for Financial Success.  While I have had the opportunity to deny rumors that I have either been promoted or fired, I would like you to know that Ryan will be sharing the duties of writing our weekly Tip.  I am certain that he welcomes your suggestions on how we can make the Tip better to serve your needs.  He can be reached at lawr@missouri.edu .

We spend a lot of time with college students.  We teach, we engage them in research, and we attempt to serve them through our financial counseling center, the Office for Financial Success.  It is apparent that students are increasingly concerned about their ability to financially support their college education.  A very recent study by the University of Arizona’s Arizona Pathways to Life Success in University Students (APLUS) came across my computer screen this morning.  The findings of the study should start you to thinking about your futures – whether you are a student, a parent, or a citizen that merely desires to see our society and economy continue to be successful, both financially and socially.

I will present the cogent points in bullets, with my commentary, if any, in sub-bullets and italics. If the bullet talks about change over time, you should be aware that the first data were collected in early 2008 and the most recent data in early 2009.  Hence, the current recession was in “crisis” mode.

  • Ninety-five percent of college students say the economic crisis has impacted their family’s finances and 93% have felt an effect on their own financial lives.
  • One of the most significant outcomes related to students’ perceptions of their financial capabilities. Although students’ factual knowledge of financial basics held steady, students rated themselves less knowledgeable, 19 percent less knowledgeable, than when previously surveyed.
    • A crisis in confidence can be very harmful to individuals’ decisions to stay the course to reach their goals.  We must have confidence in what we know are sound financial principles. Do not cut and run to the “land of fear”.  If one lets negativity take the place of confidence, personal control will erode and “quick fixes” will be sought.”Quick fixes” often become “long and painful”.
  • Ninety-five percent of the students have changed their personal money management in response to the recession. Some of this is good.  For example, budgeting, as a financial practice, rose 3% among students who felt the most impact from the crisis. The most dramatic changes, however, were not positive.  For example:
    • 169% increase in the number of students who report dropping classes
    • 106% increase in those taking a “leave” from school
    • 78% rise in the number of students who report postponing health care
    • 26% percent increase in students using one credit card to pay off another
    • Before students take such drastic measures, they should seek competent, independent advice from a financial counselor or financial aid office. These figures are alarming and devastating to a generation of students.  Students who, by tomorrow, are our leaders.
  • Debt increased among students. Students reported credit card debt up 60% percent and education loan debt up more than 85%, compared to the spring of 2008. For some ethnic groups, the rates of increase were double and triple those of the overall sample.
    • Since the data are from a longitudinal survey of a panel of students, we could expect students to both need and rationally demand more student loan debt later in their academic careers.  Yet, these increases point to the existence of severe financial stress in the students and their families
  • Money problems chip away at mental and physical health. In comments and open-ended responses students described worrying over:
    • parents losing their jobs,
    • increases in tuition,
    • fixed scholarship amounts,
    • the need to work more, and
    • whether they should transfer to more affordable schools.
  • Students’ trust in major institutions has suffered. Overwhelmingly, students in the latest wave of data report “only some” trust in government, business, banks and other major institutions. And 20% said they harbored “hardly any confidence” in these entities.
    • We all like to bash the government, the big banks, and big business.  Yet, can you imagine our life without them?  This lack of trust and its implications for political and social involvement is troubling as it interferes with, as the researchers called it, the development of “social capital”.

Although the data are sobering, the authors note that parents are in the best position to help moderate the effects of the economic crisis on their children’s attitudes and behaviors.  They state, “From the current study, we know that nearly 80 percent of students are financially dependent on their parents, and we know from earlier APLUS research that parents are the top influencer when it comes to students’ financial knowledge, attitudes and behaviors. That puts parents in a powerful position to help their young people navigate the wake of the crisis in ways that repair and restore our economy rather than hobbling it for years to come.”

  • Parental readers – Have you spoken with your child about your financial situation and their responsibilities with respect to working toward our collective brighter future?  If you are in crisis, are you optimistic or depressed?  If you are optimistic, you are much more likely to find a solution, perhaps another job, than if you are depressed.  If your depression is keeping you awake or causing you to lash out at the innocent, seek a competent counselor to help you heal.

I wish I could say that the above is “Good Stuff”.  You know that these results are not comforting.  We desire to see a horizon sporting a financial success banner.  If you are a student, please commit yourself to your studies and your investments in yourself.  Those investments cannot be taken from you.  If you are a parent, stay the course but make sure it is a good course.  Talk frankly with your older children about the successes and failures of your financial lives.  As a parent myself, I know they don’t seem to be listening and, often, they are not listening.  Yet, they are always modeling the behaviors of those they know and trust and you can’t have trust, without honesty.

For more information about the survey, visit http://aplus.arizona.edu.  The survey was funded by the National Endowment for Financial Education .

The entire packet will also be available with additional details on the TCAI Web site.

Attend a Webinar on the APLUS research on February 18, 2010, at 11 a.m. EST.

You may sign up at: http://aplus.arizona.edu/webinar.html .