WASHINGTON- A recent survey has found that college-bound students are indulging in increasingly “risky” financial behaviors. But on a more positive note, students at community colleges seem to be faring better at managing their money than those at four-year institutions.
The Money Matters on Campus study, three years in the making, reported that even though students are taking out more loans, they are less likely to pay credit cards bills on time, to review bills, and to follow a budget.
“It seems like students are not as focused on just day-to-day money management before going off to school,” said Mary Johnson, vice president of financial literacy and student aid policy at Higher One, which partners with universities in efforts to trim administrative costs. “That’s really concerning because over 30 percent of students who drop out of school without completing their degrees do so because of finances.”
Steven Isberg, associate professor of finance at University of Baltimore and a senior research fellow at the Credit Research Foundation, said “the biggest trap for people coming into colleges is to avoid getting into as much debt as people do. In today’s economy, debt is something you want to avoid.”
Johnson said one factor causing the low financial literacy of students is that they are not as exposed to money management at home as previous generations.
“You know, most people are not using cash. Correct?” Johnson asked. “They are using their credit cards and debit cards when they are young and growing up in a household.”
The Washington-based educational technology company EverFi did the research, and Higher One, a Connecticut company that sells financial services to higher education institutions, sponsored it. The research, undertaken between 2012 and 2015, probed the financial literacy of 43,000 college and university students across the U.S.
For the first time, the study included a sample of 1,000 community college students. Those students tended to behave more responsibly when it came to budgeting and paying credit card debts on time than their peers in four-year institutions, because they had more experience in the grown-up world. Many were older and had different lifestyles, often working full or part time.
Naeemah Purcell, a 24-year-old student at University of the District of Columbia Community College majoring in justice administration, said low tuition helps her manage costs.
“At most universities the tuition is like above $2,000, but here it’s like $700 if you are a D.C. resident,” Purcell said. “So we are able to make sure that we can get our books.”
Isberg said community college students are more budget-conscious because a larger percentage hold jobs, forcing them to acquire money management skills.
“They [community college students] have to go out and make budgets,” Isberg said. “Very often a two-year college student is taking care of an automobile and working an outside job, and may or may not be paying rents.”
According to the survey, 53 percent of two-year institutions students surveyed said they keep their receipts, while only 25 percent of those at four-year institutions said they do the same thing. More than 90 percent of those surveyed were in their first year of college.
In addition, 60 percent of community college students say they use budgets, in comparison to 39 percent of students at four-year institutions who do.
The release of the data this month comes as the U.S. Senate’s officially designated April as National Financial Literacy Month in 2003. Mary Johnson said she believes there’s still room for progress.
Moreover, based on a research that Council for Economic Reform conducted, only 17 states listed financial literacy course as a requirement for high school graduation in 2014.
“Clearly, it should happen earlier, it should happen in K-12,” Johnson said regarding financial education, “and before that happens, we need to be prepared to help students when they get to schools. I think colleges are beginning to embrace this, but we have a long way to go.”