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Finance: A Family Affair

In this lesson:


Financial Quiz

Activity: Take this College Finance Quiz to test your knowledge.

  1. For the 2016-2017 academic year, what was the average cost of tuition at a private, four-year college?
    1. $19,800
    2. $24,250
    3. $27,300
    4. $33,480
    5. $40,200
    (correct answer, d. $33,480)
  2. For a student attending a public four-year college in her own state, what was the average tuition in academic year 2016-2017?
    1. $9,650
    2. $13,430
    3. $15,570
    4. $19,800
    5. $24,250
    (correct answer, a. $9,650)
  3. A student attending a public two-year college in his own state paid how much in tuition during the 2016-2017 academic year?
    1. $1,500
    2. $3,520
    3. $5,650
    4. $7,780
    5. $9,650
    (correct answer, b. $3,520)
  4. In recent years, what percent of college students graduated with student loan debt?
    1. 37%
    2. 50%
    3. 63%
    4. 70%
    5. 78%
    (correct answer, d. 70%)
  5. Approximately how much debt did 2016 college graduates owe upon graduation?
    1. $25,000
    2. $33,000
    3. $37,000
    4. $41,000
    5. $48,000
    (correct answer, c. $37,000)
  6. What is the maximum standard repayment period for a federal student loans?
    1. 3 years
    2. 5 years
    3. 10 years
    4. 15 years
    5. 20 years
    (correct answer, c. 10 years)
  7. What is the most desirable form of financial aid?
    1. Federal loans
    2. Parent loans
    3. Bank loans
    4. Grants
    5. Education tax credits
    (correct answer, d. grants, because you don’t have to pay them back)
  8. A Pell grant is financial aid provided by the government, and it does not need to be repaid. Eligible students may receive up to $5,815 (academic year 2016-2017) under this program. What is the main factor for qualifying for a Pell grant?
    1. SAT score
    2. High school GPA
    3. College grades
    4. Financial need
    5. Student’s extra-curricular activities
    (correct answer, d. financial need)
  9. While about two-thirds of U.S. students receive financial aid, more than one- third of undergraduates receive Pell grants they don’t need to repay. What is the first step in applying for a Pell grant?
    1. Student must be accepted at a college or university
    2. Student must confirm which college she will attend
    3. Student must pay a deposit at his college
    4. Student must file a FAFSA form
    5. Student must attend orientation
    (correct answer, d. student must file a FAFSA form. (See https://fafsa.ed.gov/))

Knowing that more than two-thirds of college students graduate with debt, parents are wise to be concerned about their student’s money management skills. The good news is that most college students manage their money responsibly. The majority pay their debts on time (77%); don’t spend more than they have (60%); and set aside money every month. Most also have paying jobs at least part of the time while they’re in school. (65%).

Nevertheless, during the college years students are moving into a new stage of independence, and they are developing their own personal management habits, either positive or negative. These skills include decision-making, time management, and financial management. Parents need to be aware of the financial patterns their student is developing, because the choices a student makes can affect the family budget.

Did you know

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Role of Parents

Activity: Consider the following question.

How do students learn money management skills?

  1. Finance course in high school
  2. Finance course in college
  3. Trial and error
  4. Parents/family member
  5. Friends
  6. Online information

Answer: “Parents are, by far, the most common resource for college students to rely on as they learn about managing money; 71% of college students report having learned money management from their parents.”

When students see their parents balancing the family checking account, discussing budgets, and managing money, they get the message that finances are important. Similarly, parents who talk with their student about when and why they choose to use credit cards pass along a valuable lesson. Too often, students don't think before pulling out a credit or debit card to purchase something they may want but don't need.

Student: "I wish my parents would have told me to not keep my check card on me at all times."

It’s important that parents make their expectations clear. Have you discussed with your student what role you want him or her to take in managing his/her own finances?

Every family’s financial situation is different, and it’s not possible to recommend “one-size-fits-all-families” budget information. In fact, parents tell us that financial education begins at home, and that it is a family responsibility to teach students about money management. Moreover, parents say financial lessons should start early—when students are in high school or before—but the discussions must continue throughout the college years.

Tip: An important message is to help your student understand that the choices he makes now will have an impact after graduation. Parents can remind their student about critical financial issues including:

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Student Finances, Academics and Health

By working with your student proactively to develop money management skills, parents not only may be preventing financial problems down the road, but also contributing to their child’s overall health and well-being. Recent studies have looked at the impact of debt on students’ health and on the decisions they make related to their education and career choices. Debt, and the stress associated with it, can impact students’ mental health, both during college and after they graduate. A recent study showed that students with higher amounts of debt from student loans reported higher levels of depression.

The stress caused by debt may also have an impact on physical health. The research shows a relationship between debt and health issues including obesity, suicide completion, and drug and alcohol abuse.

In addition, concerns about debt are likely to affect students’ life decisions, such as career choice, delay of marriage or children, or purchase of a home. Looking into the future, students with college debt are more likely to move home and live with family after graduation.

Tip: A college education is a major family investment, but it is a smart investment on your child’s future. A family commitment to ensuring the student continues through college, graduates, and maintains a career goal for work after college provides the best outlook. Over a lifetime, college graduates earn, on average, $1 million more than those who do not graduate from college.

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