Examining the Financial Challenges of Today’s Young Adults Presented by: Jonathan Sparling, ASA NYSFAAA 2014

Examining the Financial Challenges of Today’s Young Adults

Presented by: Jonathan Sparling, ASA

NYSFAAA 2014

2Agenda

LIGHTS: What do you think today’s young adults are saying about their financial challenges?

CAMERA: What do recent studies reveal about the financial and psychological challenges of today’s young adults?

ACTION: What can we do to support today’s young adults to provide both individual and institutional support and success?

Lights!

4Your Thoughts:

What do you think today’s young adults are saying about their financial challenges?

Camera!

6Community Composition

7SALT Insiders

Since our June 19th, 2012 launch, we’ve had:

Total number of contributions: 19,215

Total number of research activities conducted: 117

Total number of community building activities conducted: 147

8Defining Financially Stable

• About half consider themselves “financially stable.”

• Primary definition: Being able to pay your bills and cover your necessities.

• Goals: Cutting back on spending; Finding a well-paying job.

“Currently I am financially stable. I am unfortunately living paycheck to paycheck, during the year that is a work study paycheck which does not help with my bills very much. But for right now I am doing alright, making some money during the summer to save for the future and for the rest of the year.”

“Fairly stable, though I have little money of my own and have to rely on loans and family support.”

9[Being financially stable means]

“…not being afraid of checking the mailbox because you know that it's bill time again, not having to dig inside the couch and under your car seats for change, never seeing a cut-off

notice, not having a panic attack when the kids need new everything, not having to break into the piggy bank when you just started putting something into it last week, not having more

numbers of bill collectors on your caller ID than friends and family, and being able to say the word financially ‘stable’ without laughing.”

10Stressors and Taboos

• Finances are the biggest stressor for many.

• School and family rank as higher priorities.

• Debt and income are the biggest taboos.

• Too personal!

• Many would change past financial decisions.

• Especially saving more and staying away from credit cards.

“I think that people do not want to discuss debt because yes it means a lack of money, but it also means that they will always have that trailing them because they cannot pay it off. Most people are ashamed that they are not able to pay it all back right away. It may not always mean they have a lack of money. It could mean that they just are not spending their money in the smartest way possible.”

“For me, debt is the biggest taboo to talk about. I don't like for others to know my business in that regard because I feel like it's personal. All of my bills get paid, but being a student sometimes sucks my bank account dry, leaving me to feel inadequate if I struggle to know where my next funds for necessities will come from.”

11Note to Former Self

“I would tell my former self to SAVE! SAVE! SAVE! I would say save as much as possible and spend as little as possible.”

“I would tell myself to be more responsible and keep track of every dollar earned and spent. I would also say SAVE!!! Save every time you can and it will add up.”

“If I were to write a letter to myself I think the only thing I could honestly say would be to Save. I have never been all that great at saving money, though I am getting better now. But having a savings that equals about 2 months worth of bills is a good thing to have, so I would definitely tell myself to work on savings, because it would come in handy many times.”

12General Background

1985 2013

Average in-state tuition at a four-year public institution

$1,3181 $8,6552

Average tuition at a four-year private institution $6,1211 $29,0562

Outstanding student loan debt $35 billion3 $1.1 trillion4

1. U.S. Department of Education, National Center for Education Statistics, Higher Education General Information Survey (HEGIS)2 College Board Advocacy & Policy Center, 20133 The Institute of College Access and Success, Project on Student Debt, 20124 Consumer Financial Protection Bureau, 2013

13ASA’s Research Question

How does student debt affect the

daily lives of young Americans?

Source: Life Delayed: The Impact of Student Debt on the Daily Lives of Young Americans. American Student Assistance, 2013.

14ASA’s Survey

Open invitation survey of young

professionals nationwide

1,000 surveys emailed and

259 responses

Survey open from May 14, 2013 – May 31, 2013

No incentive to participate


15Survey Demographics

18 to 24 25 to 30 31 to 35 36 to 40 41+0%

10%

20%

30%

40%

50%

60%

14%

54%

22%

9%

1%

Age

Professional Degree (JD, MD)

Doctoral Degree

Some Advanced Graduate Work

Master's Degree

4-year College Degree

2-year College Degree

0% 5% 10% 15% 20% 25% 30% 35% 40% 45% 50%

4%

2%

10%

38%

43%

1%

Highest Level of Education

Prefer not to answer$100,000+

$90,000-$99,999$80,000-$89,999$70,000-$79,999$60,000-$69,999$50,000-$59,999$40,000-$49,999$25,000-$39,999

Under $25,000

0% 5% 10% 15% 20% 25%

2%3%3%3%

4%10%

18%20%

21%15%

Annual Salary

93% of respondents had student

loans


16“My college experience…

“was valuable, however it is NOT worth the amount of debt I have.”

“was valuable to my personal fulfillment, but I wish I had a job in the field.”

“was valuable but I could have probably gotten the same value going to a cheaper college.”

“was transformative, but I’m not sure it was worth the expensive price tag.”

“was great and opened up opportunities for me. However, student loan debt has made my life challenging after, especially to pursue a career in the field I want to. I get by every month, but it is tough.”

“was valuable and left me better off, but the debt is seriously holding me back significantly.”

17

43% said that student debt has delayed their decision

to start a family.

Impact of Student Debt

63% said student debt impacted their ability or decision to make larger purchases such as a car.

27% found it difficult to buy daily

necessities. 30% stated their student loan debt was the deciding factor, or

had considerable impact, on the choice of career field. 29% indicated that

they have put off marriage.

75% indicated their student debt impacted

their ability or decision to purchase a home.

73% said they have put off saving for retirement

or other investments.


18Impact on Living Choices

YES

Did you student loan debt factor into your decision of which state you would live in after leaving school?

28%

Did you intentionally move to a low cost of living state?

31%

My student loan debt played a role in my decision to live with roommates.

29% - Strongly applicable14% - Somewhat applicable


19Education Decisions


20Student Loan Responsibility

Who do you feel is responsible for your student loan debt?


21Giving Back

YES

Should your alma mater help you manage your debt? 60%

Does your student debt impact your ability to donate to your alma mater?

77%

Does your student debt impact your willingness to donate to your alma mater?

72%


22Survey Comments

I only took out the amount I NEEDED, so I feel like I walked away with much less debt than many do, but it was a joyous day when I made that last payment!

I would not have taken more than the bare minimum if I knew what I know now.

Student loans will control how you are able to live your life.

It’s sad and disheartening that I have a negative reaction to my college experience due to the financial impact it has had on my post-graduate life.

My poor, poor generation.

This is the only debt I have ever had. I am very responsible with my finances in every other aspect of my life, but the fear of this debt is crushing.

23Survey Comments

Student debt weighs on every decision I make, from food shopping, to where I choose to live, how I spend my free time, to what clothes I wear, and ultimately, what career I choose.

My parents also took out a loan to help pay for my schooling. I wish I could help them pay off the loan but I am not in the financial position to do that. Without their willingness to take out a parent loan, my own student loans would have been much higher. Student loan debt has impacted my whole family.My debt is minimal. It is scary to think about

the way debt has impacted many of my friends and loved ones.

Upon graduation you realize that you can’t really begin the life you imagined having after college.

24College Loans/Costs Top Money Issue for Young Adults

• An April 2014 poll by Gallup has found that paying for college or paying student loans is the top financial problem for adults who are 18-29 years old, with 21 percent citing the issue.

• That issue beats out lack of money/low wages (15 percent) and housing costs (14 percent).

• Paying for college or students was also the top issue cited by those 30 to 49 years old, but the percentage citing the issue was smaller (14 percent).

http://www.gallup.com/poll/168584/young-adults-cite-college-costs-top-money-problem.aspx?utm_source=WWW&utm_medium=csm&utm_campaign=syndication

Action!

26Institutional Understanding

A survey of 16- and 17-year-old high school students by the College Savings Foundation reported that almost all (94%) were concerned about their potential debt burden at graduation.

What is the message that your president conveys?

What messaging is provided by your admission and/or financial aid offices?

Source: High School Students Unprepared for Rising Costs of College with Deep Divide Between Funding Plans and Actions. Rep. College Savings Foundation, 2012. Web.

27Alumni Giving

• “The mere fact of taking out a student loan decreases the probability that an individual will contribute to the university as an alumnus.”

• What is your alumni giving trend?

• What are you doing to educate students about their debt and how to manage it?

Source: Meer, Jonathan, and Harvey S. Rosen. “Does Generosity Beget Generosity? Alumni Giving and Undergraduate Financial Aid.” National Bureau of Economic Research. February 2012. Web.

28Financial Aid

• Across all institutions, the amount of the debt itself seems to be less important than how the student feels about his ability to manage it.

• What are you doing for entrance and exit counseling?

• What else are you doing for borrower education?

• What are you doing for financial education in general?

29Retention and Student Success

• The 1,669 colleges and universities studied collectively lost revenue due to attrition in an amount close to $16.5 billion with the largest single school losing $102,533,338, the smallest single loss being $10,584, and the average school losing $9,910,811.

• What retention efforts do you have in place?

• Are you focused on student success?

• Are you providing holistic well-being services?

Source: Cost of Recruiting an Undergraduate Student: Benchmarks for Four-Year and Two-Year Institutions. Rep. Noel-Levitz, 2011. Web

30Alumni Financial Impact

• An average student debt burden for a dual-headed household with bachelors’ degrees from 4-year universities ($53,000) leads to a lifetime wealth loss of nearly $208,000.

• Nearly two-thirds of this loss ($134,000) comes from the lower retirement savings of the indebted household, while more than one-third ($70,000) comes from lower home equity.

• The wealth loss will be greater for households with larger-than-average levels of student debt: students from low-income families, students of color, and for-profit students.Source: At What Cost? How Student Debt Reduces Lifetime Wealth. Robert Hiltonsmith. August 2013. Demos.org.

31Got the Same Script?

• Is everyone on the same page?

• Have you conveyed the “WIIFM” to each group?

Common mission

32Director’s Cut

Short Term

• Identify three actions you would like to take that will have an immediate positive impact – for either current students or alumni.

Long Term

• Consider the ideal state.

• What resources do you need to make this happen?

• Who do you need to partner with?

• What does the final script look like?

Thank you!

Documents

Examining the Financial Challenges of Today’s Young Adults Presented by: Jonathan Sparling, ASA NYSFAAA 2014