Lender Code 833733

Lana Low, Ph.D.Financial Literacy Research

How Much Is Too Much?MASFAA

November 4, 2005

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.

The Question

How much is too much?

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

Retention

Retention

“For every complex problem, there’s a solution that’s simple, neat … and wrong.”

− H.L. Mencken

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

Risk Factors

Characteristics that place students at risk of dropping out Demographic and socioeconomic Academic Financial Timing, lifecycle and motivational

Financial Literacy

Financial Literacy

Students don’t know what they don’t know.

Literate Versus Illiterate

The financially literate have a well-rounded knowledge of their personal finances, while the illiterate tend to be oblivious

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

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

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

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

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

Retention and Financial Literacy

Key Questions

Who stays? Who leaves? What makes the difference? What can we do about it?

The links between retention and financial literacy

Retention Puzzle

Institutional Assessment

Student Assessments

Institutional Interventions

Student Interventions

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

GPA of First-Year Dropouts

4,915 students; 46 institutions; 1,493 dropouts

Source: RMS Validity Study, Noel-Levitz, 2000

Institutional Performance

Source: Student Satisfaction Inventory, Noel-Levitz, 2003

Importance – satisfaction = performance gap

Financial Guidance

Source: USA Funds Retention Project - 2002

Students at 2-Year Campuses

Financial Guidance

Source: USA Funds Retention Project – 2002

Students at Career and Proprietary Schools

Financial Guidance

Source: USA Funds Retention Project – 2002

Students at 4-Year Campuses

Financial Guidance

Source: USA Funds Retention Project - 2002

Faculty, Staff and Administrators at 4-Year Campuses

Financial Guidance

Source: USA Funds Retention Project - 2002

Faculty, Staff and Administrators at 2-Year Campuses

Financial Aid and Retention

Source: Noel-Levitz, 2002

Academic Preparation

Who Are Your Students?

Entering risk factors Motivation risk

factors Integration risk

factors

Student Assessmen

ts

Conceptual Model of Retention

Entering Student Variables

+ Student Motivation Variables

+ Student Integration Variables

= Student’s Likelihood to Persist

Entering Student Variables

Academic history Geo-demographic variables Test scores Initial impressions of institution Enrollment factors Financial aid information Financial history Financial literacy scores

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

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

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

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

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

StudentInterventio

ns

Student Success = Weaving the Pieces Together

Institutional Assessment

Student Assessments

Institutional Interventions

Student Interventions

Financial Literacy

Successful access, retention and financial literacy practices provide students with the tools they need to

survive – before they know they need them

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

Financial Literacy – Implementation Strategies

Entrance counseling Exit counseling Student success

courses Seminars/workshops Money management

counseling Student orientation High school outreach

Student probation TRIO programs Training Peer financial

counseling Career development Financial aid

awareness Parent orientation

Financial Literacy – Target Audiences

First-year students Second-year

students Third-year students Graduating students All students

Parents High school students Student athletes Staff TRIO participants

Financial Literacy – Delivery Units

Academic affairs Student affairs Financial aid office Lenders/guarantors Career services Student support services

Other Financial Literacy Programs

Programs to Review Online

Participants

Brigham Young UniversityUniversity of Arizona   University of Georgia Iowa State University  

Montana State UniversityOhio State UniversityTexas Tech UniversityWright State University

Programs

Financial Path to GraduationCredit Wise Cats Peer Financial Counseling Consumer and FinancialManagement Publications

Family Financial Literacy Project

Freshmen Success SeriesRed to BlackWright Financial Path

Contacts

Lana LowConsultant, Retention and Financial LiteracyPhone: 276.393.2981Business Email: lanalow@adelphia.net

Jason A. KahnDirector, School RelationsCollege Loan CorporationOffice: 781.558.1605Cell: 781.856.2652Business Email: Jkahn@collegeloan.com

Questions

Lender Code 833733

Lana Low, Ph.D.Financial Literacy Research

How Much Is Too Much?

MASFAA

November 4, 2005