A recent Student Voice survey from Inside Higher Ed and College Pulse found that 77.5% of respondents indicated that they will graduate with student loan debt. No surprise there, since 2006, the national total student loan debt balance has grown, after adjusting for inflation, by158.2%. As of January 2022, the national student loan balance is approaching $1.8 trillion. It is estimated that it will take the average student loan borrower 20 years to pay off their student loan debt. (Source: Hanson, Melanie. “Average Student Loan Debt by Year” EducationData.org, January 19, 2022)
The U.S. Financial Literacy and Education Commission published a report in 2019, "Best Practices for Financial Literacy and Education at Institutions of Higher Education" calling on higher education institutions to adopt of the following five categories of best practices:
- Providing clear, timely, and customized information to inform student borrowing
- Effectively engaging students in financial literacy and education
- Targeting different populations by use of national, institutional, and individual data
- Communicating the importance of graduation and major on repayment of student loans
- Preparing students to meet financial obligations upon graduation
In recent years higher education institutions across the country have been making the inclusion of financial literacy education a core staple in their programs. However, these programs are general in nature and lack the practical data and tools necessary for students to take appropriate actions.
Does your institution's student financial planning tools support financial literacy?
Financial aid is one of the most complex, and important, elements in a student information system, and often is a combination of disparate technologies, databases and manual procedures. Today's student financial planning systems requires a modern fully integrated approach that is transparent and easily accessible to the student. Some of the attributes that you would expect to find in a modern student financial planning system that supports financial literacy:
- Loan borrowing calculator to help the student make informed decisions regarding the amount of debt they are incurring
- Mobile application with current real-time financial information that includes financial tools
- Streamlined access to the information students need to complete verification requirements and gain eligibility for aid
- Maintain timely and accurate data from the National Student Loan Data System for each student empowering advisors and students with information in hand when making vital decisions
- Manage each financial aid package individually while providing real-time visibility into a student's entire student loan program
Guiding and teaching students practical, actionable financial literacy is a national imperative. Providing them the tools and systems necessary to avoid the pitfalls associated with financing higher education, and empowering them to make optimal financial choices, should be a priority of all institutions of higher education.
If you find that your current student financial planning system is missing one or more of the attributes listed, it may be time consider upgrading your system.