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Worried in college

College students feel the cost of college is worth the investment despite concerns about finances and student loan debt.

Those findings and others about student attitudes related to credit card debt, financial behaviors and stress are part of the newest Study on Collegiate Financial Wellness, developed by Catherine Montalto, an associate professor of consumer sciences, and Anne McDaniel, executive director of the Center for the Study of Student Life, at The Ohio State University.

Montalto, whom peers call a pioneer in the field of collegiate financial wellness research, has spent her career studying consumers’ financial decision making and well-being. She previously surveyed college students nationwide and across Ohio about their debt and financial stress, and her findings have shaped the design of initiatives at Ohio State to address students’ concerns.

The 2017 update of the Study on Collegiate Financial Wellness included responses from nearly 30,000 college students at two- and four-year institutions. They hailed from 90 campuses across the United States.

This survey revealed the majority of students engage in positive financial management behaviors and have high financial self-efficacy. Yet seven out of 10 students reported feeling stressed about their finances in general.

Montalto discussed the latest research and what students and parents can do to improve their financial wellness.

How have students’ attitudes about debt changed over time?

In 2010, it was more common for students to report being concerned about their credit card debt than their student loan debt. That switched by 2014 for students who are using student loans.

Numerically, we have more people on our campuses using student loans. Nearly 75 percent of college students use loans or grants to pay for their education, and it’s important for students to use those loans responsibly.

I think students are looking not only at how much they have to pay back, but their ability to pay back. If students have accumulated high loan debt — high relative to what they perceive their earning potential to be — then that’s quite worrisome to students. Even to the point where students say they feel “stress” when they think about those types of issues.

Why is high student financial stress harmful?

The worrisome thing about the students who report financial stress is that they’re also more likely to say they’ve thought about dropping out of school or reducing credit hours to work more.

The concern is that if you reduce your hours or skip a semester, you’re prolonging the time to complete a degree. When you prolong time to complete your degree, you’re having to pay for another semester of tuition and fees — and driving up the costs of college in the long run.

Student Financial Wellness, The Ohio State University
Student Financial Wellness, The Ohio State University
Student Financial Wellness, The Ohio State University
Student Financial Wellness, The Ohio State University
Student Financial Wellness, The Ohio State University
Student Financial Wellness, The Ohio State University
Student Financial Wellness, The Ohio State University
Student Financial Wellness, The Ohio State University
Student Financial Wellness, The Ohio State University
Student Financial Wellness, The Ohio State University
So how do we help students understand the gravity of these decisions before they are in debt?

An important message to our students is to borrow responsibly and keep down how much debt they’re accumulating.

We have anecdotal evidence of students just defaulting to borrowing what they were approved for and spending all of that borrowed money. If they perceive that their loan is more than what they need to pay their expenses, some use that money to enhance their quality of life.

The important question is: “Do you want to live like a college student now? Or do you want to live like a college student later?”

If you’re a bit more responsible now and borrow only what you need for the cost of attendance at the university, you’ll have a lower accumulated balance and you’ll be able to pay off the lower balance more readily.”

Do today’s college students understand how to manage money?

A fairly good segment of students are managing money well. About 70 to 75 percent of students plan what they’re going to spend, monitor their accounts, pay their bills on time.

A smaller segment of students tend to be less effective in managing — more likely to be overdrawing bank accounts or paying bills late or paying only minimum amounts on credit cards so debt is accumulating.

Those are the students we’d like to be able to reach with our financial awareness and financial education efforts.

What did you discover about college students’ behavior when it comes to managing their finances?

There is variation — as you would expect around any other college student behavior.

There’s a respectable segment of students who are acting responsibility. For example, they are planning what they are going to spend, monitoring their accounts and paying bills on time.

But there’s also a segment of students who are engaging in behaviors that aren’t quite so positive. If they are using credit cards, they aren’t paying off full balances; so they’re being charged interest and, over time, are really paying a lot for using their credit.

We saw some of this less responsible behavior in 2010 and in 2014, too, and it informs how we design initiatives on Ohio State’s campus to address those concerns.

What causes students to worry about their finances?

Most students actively think about their finances and are very intentional about how they spend their money. Those are both positive financial behaviors that really contribute to an overall sense of well-being. On the other hand, we know some students worry more or express higher levels of financial stress.

In our research, we found two factors that are strongly correlated with students reporting high levels of financial stress or worry: high student loan debt and desire to participate in activities with friends.

Peer influence is strong, and it’s interesting to see how this effect has persisted over the years.

If a student doesn’t think he has enough money to do the things the peers can do, that’s strongly correlated to the stress the student feels.

For example, when friends are planning to go out to dinner, and you know, financially, you really should be using your meal plan instead, it’s hard to say “no” in that environment. Students report examples of this type of peer influence, and it has left them feeling financially strapped.

We design initiatives to help students think about ways to maintain social relationships with peers and also protect their own financial resources.

How can students be better prepared to manage money before they get to college?

In our study, we ask students about their experiences with money before they came to college. We find that things like allowances and managing money in some way matter. Students who have had those kinds of responsibilities come to college feeling a little more able to manage their finances.

Why do you continue to study this every few years? What’s the purpose of these studies?

These repeated studies provide a pulse on the behaviors, attitudes and financial wellness of students in a very broad sample across institutions — both two- and four-year schools, public and private.

We offer a valuable service to those institutions participating in our research because they get customized reports about students on their own campuses.

These customized reports are valuable in trying to inform practices on campuses around initiatives to create financial awareness and responsible financial behaviors. We’re really trying to contribute to financial well-being, not only while the student is in college, but as they leave college and pursue their professional and personal lives going forward.

Through these studies, have the colleges you have worked with been able to use the information learned to effect change?

We can observe several things that have changed over time and things that look different than they did in 2010.

If you look at the level of stress around credit card debt in the 2010 study compared to how it looked in 2014 and 2017, the reported level of stress from credit card debt is trending down. The Credit Card Act of 2009 may also impact this change since the act restricts access to credit cards. We’ve also been doing a lot on campus to promote responsible use of credit cards.

We can’t say our efforts have directly caused that change but the association is in the right direction, and we’re glad to see the reported  level of stress from credit card debt is going down.

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