Lana Low, Ph.D. Financial Literacy Research

1. How Much Is Too Much? MASFAA November 4, 2005 Lana Low, Ph.D. Financial Literacy Research

2. The Session The economic downturn and failure of financial aid funding to keep pace with rising educational costs has resulted in the extraordinary increases in private loan and credit card borrowing and a critical need for financial literacy and responsibility. Many financial aid offices are now required to address access and retention issues and play an active role in enrollment management. This session provides research information on the challenges and opportunities for increasing participation rates in higher education; what we know about who shows up, stays and leaves college; what makes a difference; and the relationship between financial literacy programs and retention.

3. The Question How much is too much?

4. Agenda Retention • What do we know about who stays, who leaves and what makes the difference? Financial Literacy • What do we know about the relationship between student finances and retention? Retention And Financial Literacy • Your questions

5. Retention

6. Retention “For every complex problem, there’s a solution that’s simple, neat … and wrong.” − H.L. Mencken

7. Myths • Dropouts are flunkouts • Students bring a cogent map of college success to campus • Finances, work and family are sole reasons for students dropping out • Retention is not my responsibility

8. Risk Factors • Characteristics that place students at risk of dropping out • Demographic and socioeconomic • Academic • Financial • Timing, lifecycle and motivational

9. Financial Literacy

10. Financial Literacy Students don’t know what they don’t know.

11. Literate Versus Illiterate • The financially literate have a well-rounded knowledge of their personal finances, while the illiterate tend to be oblivious

12. Myths • Paying the minimum on your credit card(s) is okay • Bad credit is wiped out at 21 • They won’t let you borrow more than you can afford • Keeping a credit card with a zero balance doesn’t affect your credit • Student loans are the same as grants - they don’t have to be repaid Tally Hart, The Ohio State University

13. Financial Literacy - 2004 • 68.2% of high school seniors do not use a credit card • 11.4% use own card • 15.7% use parents’ cards • 4.8% use both • 72% of college students have a regular full- or part-time job • 83% of college students had credit cards in 2001 • Average number of cards per college student is 4.25 • 21% owe between $3,000 and $7,000 • 6% owe more than $7,000 Source: www.jumpstartcoalition.org/upload/ACF2F0E.doc

14. Financial Literacy - 2005 • 76% of college students have credit cards • Average number of cards per college student is 4.09 • 43% have four or more cards • 43% obtained first card as a freshman • 72% of sophomores had credit cards (71% growth rate) • 16% owe between $3,000 and $7,000 • 7% owe more than $7,000 Source: 2005 Nellie Mae Study of Undergraduate Students and Credit Cards

15. Financial Literacy and the Family • 40% of Americans live beyond their means • Average credit card debt per household rose to $8,562 in 2002 - up from $2,985 in 1990 • More than half of American workers between the ages of 45 and 54 did not have any kind of retirement account in 1998 • 87% of college students rely on their parents for financial guidance • 70% say their parents have not given them tips or advice about spending wisely • 80% of parents believed schools provided classes on money management and budgeting Source: www.jumpstartcoalition.org/upload/ACF2F0E.doc

16. Americans in Debt Denial? • Most say they use credit cards wisely • 87% of Americans responsible for paying credit card bills say credit card spending has not been a source of irritation with others in their life • Only a minority own up to having credit card problems • 27 percent admit to getting into financial difficulties because of credit card spending • Americans believe paying off debt should be a top priority • 63% say paying off credit card debt makes better financial sense than putting money away for children’s education • They’re concerned about other people’s credit card debt but claim they don’t have a problem themselves • 64% of Americans say they think most people they know are concerned about being able to pay their credit card bills each month Source: April 2004, Bankrate Financial Literacy Survey

17. Retention and Financial Literacy

18. Key Questions The links between retention and financial literacy • Who stays? • Who leaves? • What makes the difference? • What can we do about it?

19. Retention Puzzle Student Assessments Institutional Assessment Student Interventions Institutional Interventions

20. Who Are You? • First-year retention rates • Graduation rates • Student achievement • Performance gaps • Financial aid impact • Indebtedness (loans and credit cards) • Loan default rates Institutional Assessment

21. GPA of First-Year Dropouts 4,915 students; 46 institutions; 1,493 dropouts Source: RMS Validity Study, Noel-Levitz, 2000

22. Institutional Performance Importance – satisfaction = performance gap Source: Student Satisfaction Inventory, Noel-Levitz, 2003

23. Financial Guidance Students at 2-Year Campuses Source: USA Funds Retention Project - 2002

24. Financial Guidance Students at Career and Proprietary Schools Source: USA Funds Retention Project – 2002

25. Financial Guidance Students at 4-Year Campuses Source: USA Funds Retention Project – 2002

26. Financial Guidance Faculty, Staff and Administrators at 4-Year Campuses Source: USA Funds Retention Project - 2002

27. Financial Guidance Faculty, Staff and Administrators at 2-Year Campuses Source: USA Funds Retention Project - 2002

28. Financial Aid and Retention Academic Preparation Source: Noel-Levitz, 2002

29. Who Are Your Students? • Entering risk factors • Motivation risk factors • Integration risk factors Student Assessments

30. Conceptual Model of Retention Entering Student Variables +Student Motivation Variables + Student Integration Variables =Student’s Likelihood to Persist

31. Entering Student Variables • Academic history • Geo-demographic variables • Test scores • Initial impressions of institution • Enrollment factors • Financial aid information • Financial history • Financial literacy scores

32. Jump$tart Coalition Survey • Percentage of questions answered correctly • 1997 – 57.3% • 2000 – 51.9% • 2002 – 50.2% • 2004 – 52.3% • 65.5% received a score <60% • Only 6.1% scored 70% or better Jump$tart Coalition 2004

33. Student Motivation Variables • Freshman survey data • Academic and social motivation data • Placement tests • Academic plans/goals • Family support system • Sense of financial security • Receptivity to financial guidance

34. Student Integration Variables • Residence status • Predicted GPA • End-of-term grades • Affiliations • Credit hours attempted/completed • Academic status • Major • Residence hall assignment • Credit card debt • Student loan debt • Work hours

35. How Proactive Is Your Institution? • Retention committee • Student success goals • Student tracking • Student feedback plan • Staff training • Faculty development • Faculty/staff awards • Financial literacy programs Institutional Interventions

36. Commitment to Student Success • How do you show students you’re serious about their success? • Intrusive advising • Extended orientation • Student success plans • Mentoring • Wellness • Financial guidance Student Interventions

37. Student Success = Weaving the Pieces Together Student Assessments Institutional Assessment Student Interventions Institutional Interventions

38. Financial Literacy Successful access, retention and financial literacy practices provide students with the tools they need to survive – before they know they need them

39. A Study of Best Practices in Financial Literacy • 100+ colleges and universities interviewed • Executive summaries • Campus buy-in • Specific implementation strategies • Staffing • Results (quantitative and/or qualitative) • Recommendations Source: USA Funds Best Practices Study, 2004

40. Entrance counseling Exit counseling Student success courses Seminars/workshops Money management counseling Student orientation High school outreach Financial Literacy – Implementation Strategies • Student probation • TRIO programs • Training • Peer financial counseling • Career development • Financial aid awareness • Parent orientation

41. First-year students Second-year students Third-year students Graduating students All students Financial Literacy – Target Audiences • Parents • High school students • Student athletes • Staff • TRIO participants

42. Financial Literacy – Delivery Units • Academic affairs • Student affairs • Financial aid office • Lenders/guarantors • Career services • Student support services

43. Other Financial Literacy Programs

44. Participants Brigham Young University University of Arizona   University of Georgia  Iowa State University  Montana State University Ohio State University Texas Tech University Wright State University Programs to Review Online Programs Financial Path to Graduation Credit Wise Cats Peer Financial Counseling Consumer and Financial Management Publications Family Financial Literacy Project Freshmen Success Series Red to Black Wright Financial Path

45. Contacts Lana Low Consultant, Retention and Financial Literacy Phone: 276.393.2981 Business Email: lanalow@adelphia.net Jason A. Kahn Director, School Relations College Loan Corporation Office: 781.558.1605 Cell: 781.856.2652 Business Email: Jkahn@collegeloan.com

46. Questions

47. How Much Is Too Much? MASFAA November 4, 2005 Lana Low, Ph.D. Financial Literacy Research