In this lesson:
Activity: Take this College Finance Quiz to test your knowledge.
- For the 2016-2017 academic year, what was the average cost of tuition at a private, four-year college?
- For a student attending a public four-year college in her own state, what was the average tuition in academic year 2016-2017?
- A student attending a public two-year college in his own state paid how much in tuition during the 2016-2017 academic year?
- In recent years, what percent of college students graduated with student loan debt?
- Approximately how much debt did 2016 college graduates owe upon graduation?
- What is the maximum standard repayment period for a federal student loans?
- 3 years
- 5 years
- 10 years
- 15 years
- 20 years
- What is the most desirable form of financial aid?
- Federal loans
- Parent loans
- Bank loans
- Education tax credits
- 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?
- SAT score
- High school GPA
- College grades
- Financial need
- Student’s extra-curricular activities
- 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?
- Student must be accepted at a college or university
- Student must confirm which college she will attend
- Student must pay a deposit at his college
- Student must file a FAFSA form
- Student must attend orientation
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
- Debt can have a negative effect on students’ grades. Excessive debt often leads to decisions to reduce study or class time in order to work more hours to pay off bills and accounts.
- If students rethink their academic commitment and drop a course a few weeks into the semester, they still will be charged for the class even though no credits will be earned.
- Students who go below full-time student status (12 credits) may no longer qualify for a student discount on their parents’ auto insurance coverage. They also may lose their eligibility for scholarships.
- Students with fewer than eight credits typically are not eligible to live in a residence hall. (Exceptions may be made for illness or special circumstances.)
- If the student drops below half-time status, some loan repayments will kick in.
- Wages earned this year may reduce financial aid eligibility for next year. Students might decide to work more hours to pay off debts, then discover that they will receive a smaller amount of grant or loan dollars the following year. Parents may then need to contribute more or take out a parent loan to cover the deficit.
- Students with excessive credit card debt or overdue payments run the risk of having a bad credit rating, and parents may feel they need to help out their student.
- Poor credit ratings can influence hiring decisions in the future. Potential employers can request an investigative consumer report about job applicants.
Activity: Consider the following question.
How do students learn money management skills?
- Finance course in high school
- Finance course in college
- Trial and error
- Parents/family member
- 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:
- keeping track of how much is being spent
- the pitfalls of excessive credit card debt or overdraft of debit accounts
- the necessity of setting aside funds each year as a reserve for the following year’s expenses
- and the implications of graduating with significant college loans
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.