Hamline News

Fast Track to Financial Literacy

FinanceArticle

Generation Y: today’s college students and the children of baby boomers, they are independent, tech savvy, and bombarded by the media that often fosters a sense that they haven’t reached status quo until they purchase a Prius and an iPhone. College life adds to the pressure, as students juggle image control with student loans, credit cards, transportation costs, and insurance. The cost of keeping up with such expenses can take its toll on students’ mindsets—not to mention on their wallets.

According to the Minnesota Department of Higher Education, 55 percent of Minnesota undergraduates took out student loans in 2007–2008, and 76 percent of students who attended private colleges borrowed an average of $28,600 by their senior year. Experts agree an investment in “you” is one worth making, but add credit-card debt to the mix and students start to sink. A 2009 Sallie Mae study shows that the average senior graduates with more than $4,100 of credit-card debt and nearly 20 percent of seniors carry balances of more than $7,000.

Factor in an unprecedented recession, and today’s Pipers are approaching Hamline student services offices with serious questions. “I hear questions about financing education all the time,” says Lynette Wahl, director of financial aid. “But it’s become more serious. ‘What do I do now that my parents lost their jobs?’ Or, ‘Will student loans still be available?’ ”

Hamline staff members took notice of these concerns and set to work to empower students about their finances. In fall 2008, Hamline staff members, professors, and students, as well as a Hamline School of Business student organization, joined together to launch the Financial Literacy Committee (FLC).

“We wanted to create a program that helps students understand what it takes to finance their Hamline education and teaches them how to budget and manage their personal finances,” says Monita Mohammadian Gray, director of student retention and transfer student services and chair of FLC. “For many students, this may be the first time they’re handling money on their own. We also want to give them a good foundation to prepare for life after Hamline.”

Learning by Example
Financial trouble can start anywhere. Students often don’t comprehend that they will one day have to pay back the vast amount of money they take out in financial aid. And in addition to their studies, they’re trying to keep up their social lives. They want to live off campus, have a car, and go out on weekends, but they also need the basics: books, groceries, and clothing. Many students work 20 to 30 hours or more per week to make ends meet. Such hectic student schedules often cause fluctuations in student retention rates. Education in financial planning may be just the ticket to keep students focused on why they’re at Hamline in the first place: to learn.

Amanda Grimm, a graduate student in Hamline’s School of Business and degree audit and technology administrator for the university’s registration and records department, knows the financial struggles of college students all too well. Last spring Grimm, 29, paid off more than $26,000 (including interest) in consumer debt she had accumulated since high school. Her first credit card purchase: a prom dress. “The way I figure it, that dress cost me much more than the original $150 after 10 years of interest,” she says.

In 2005 Grimm, age 25 and two years out of college, was overwhelmed by debt. Coincidentally, her then-coworkers were doing “Total Money Makeover,” a step-by-step process to becoming debt free created by radio talk-show host and money-management guru Dave Ramsey. In need of a jumping-off point, Grimm gave it a try. Following Ramsey’s advice, she created a monthly budget and divided any leftover cash after paying her bills into envelopes for food, gas, and household supplies. When that money ran out, Grimm was done spending for the month. Period.

“The envelopes were one tactic I used in the beginning to rein in my spending,” she says. “I also did my budget by hand, on paper, because that was the least complicated for me. When I got that under control, I went back to using my debit card [instead of cash] and eventually moved my budget to an Excel spreadsheet. I recently started using Mint.com, a free money-management site. It was all about finding the system that worked best for me at the time.”

After paying off her consumer debt, Grimm, now an FLC member, is happy to help others learn from her mistake. “If at the very least they realize, ‘Jeez, this girl really screwed up by using credit cards,’ and are a little smarter about using their own credit cards, it’s a start,” she says.

Through FLC Grimm hopes to continue to spread the word on how to create a budget and stay debt free and most of all to get people talking about their finances. “The thing that kills me is that everyone thinks someone else—parents or high school teachers and college professors—should have taught them about money management,” says Grimm. “What it comes down to is that we should all be teaching each other.”

It Takes a Village
School of Business professor and FLC member Jenny Keil laughs when she talks about how students often have nicer cars than faculty members. She uses herself as an example, telling her classes about her $12 haircuts and her old van with 80,000 miles on it (which, by the way, is paid for). “I think our culture has been brainwashed into thinking we should have everything we want whenever we want it,” says Keil who has taught introductory financial planning courses to young alumni, as well as a firstyear seminar course called “Show Me the Money” about managing finances.

Keil, who worked on Wall Street straight out of college during its boom in the late 1980s, understands the temptation of consumerism. In her classes she teaches students to focus on having a high level of income versus a high level of consumption. “The freshman response is mixed,” she says. “They’re often not ready to live in the real world and assume that their parents will somehow figure out a way to give them what they want. Seniors are ready to listen a little harder. They see their college career coming to a close and are looking for some practical advice.”

Advice FLC is eager to provide. In its first year the committee offered five programs for students: “Get Out of Debt: Tips and Strategies from a Personal Experience” (presented by Grimm), “Financial FUNdamentals;” “Credit Smarts, Loan Repayment;” and “Alumni Panel: What They Wished They Would Have Known While in College.”

This year the committee will expand its programming and reach, incorporating an introduction to money management, a financial-aid seminar, and advice to parents on how to talk to their students about money into the summer orientation program for first-years. This fall and through the winter, the committee will educate all students on credit scores, identity theft, credit-card debt, and loan repayment. In the spring the focus will shift to seniors, educating them on benefits packages, retirement plans, auto and life insurance, and how to buy a home.

“Most people don’t know those things when they graduate,” says Gray. “We hope to provide some of that information on the front end. If you’re graduating with ‘X’ amount of debt, what kind of income do you need to live within your means, so that you don’t get out of control with credit-card debt?”

Continuing Success
Last year the committee saw a fairly good turnout for seminars, especially when marketing efforts were strong (and free food was offered). This year it hopes to increase awareness with more posters and email announcements, as well as a Facebook page and a new website.

As director of financial aid, Wahl works with both undergraduate and graduate students at Hamline and sees money management as a campuswide effort. (According to a study by Nellie Mae, the average outstanding credit card balance for graduate students is nearly $9,000.) While FLC programming currently focuses on undergraduate students, no interested student at Hamline will be turned away.

With all eyes on the economy it seems these days, more than ever, students need financial guidance. But, between full course loads, work schedules, and social lives, will students be responsive to FLC seminars? Keil believes they will. “I’m excited about the committee,” she says. “If we have programming every few months there’s no way students will miss the message.”

By: Amanda Fretheim Gates