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A surprising number of students entercollege with a failing grade in financialliteracy. According to the Jump$tartCoalition for Personal Financial Literacy,a nonprofit organization that administersa biennial financial literacy test to highschool seniors, basic concepts of saving,investing, and responsible credit use areforeign to many students.

More than 6,800 high school seniorsin 40 states took the test in 2008. Highschool seniors have scored consistently

NATIONAL ASSOCIATION OF STUDENT FINANCIAL AID ADMINISTRATORS 7

Right on the Money

Training Students in Financial LiteracyBy Matt Smith

The “freshman 15”—the weight gain college students experience on a diet of

cafeteria food and too many late-night snacks—is the biggest worry for many

starting students. Given the cost of college and the debt many take on in student

loans and credit cards, they should be more concerned with their long-term finan-

cial health. Money worries start right away for many college students. Fresh-

men are often unprepared to handle the countless credit card offers that fill

their mailboxes and e-mail accounts. Many students are on their own for the

first time and are ill-equipped to make good decisions about their money —

decisions that can affect their financial well-being long after they have collected

their diplomas.

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low since the test was first adminis-tered in 1997. This year, studentsanswered only 48 percent of test ques-tions correctly.

The results of the survey, along withslumping economic trends, demonstratethe need for financial literacy education.

In a speech to Jump$tart Coalitionmembers, Federal Reserve Board Chair-man Ben Bernanke emphasized theconnection between a financially literateworkforce and a healthy marketplace.

“In light of the problems that havearisen in the subprime mortgage market,we are reminded of how critically impor-tant it is to become financially literate atan early age so students are betterprepared to make decisions and navigatean increasingly complex financial market-place,” said Bernanke. “Financial liter-acy and consumer education make themarketplace effective and efficient, andbetter equip consumers to make tough,yet smart decisions.”

The Growing Debt BurdenIn recent years, financial aid profes-

sionals have grown concerned with find-ing better ways to educate students onmanaging their finances and handlingdebt. Making sure students learn moneymanagement skills is more important thanever because the majority of students inthe U.S. incur debt from student loans themoment they enter college.

Record numbers of college students areapplying for financial aid, and borrow-ing larger sums. During the first half of2008, 8.9 million students nationwideapplied for federal student aid—anincrease of 16.3 percent over the sameperiod a year ago.

States facing budget problems arecontributing less to public colleges anduniversities. As a result, many collegesare increasing tuition to cover costs, forc-ing students to borrow more. For exam-ple, from 2002 to 2008, tuition and feesat public, four-year universities increased31 percent.

According to Tanisha Warner, aspokesperson for the nonprofit service

agency Consumer Credit CounselingService, many graduates suffer fromsticker shock once they receive theirdegree. “Fresh out of college, it’s notuncommon for student loan payments torepresent the largest financial obligationmany graduates face,” says Warner.“These students find it difficult to keepup with their daily obligations in addi-tion to their new student loan payments.”

Student loan entrance and exit coun-seling alone may not be enough to helpstudents manage their debt obligations.In addition to repaying their studentloans, students also have to contend withcredit card debt they incur in college.According to a 2004 study conducted byNellie Mae, over 75 percent of studentsown a credit card and use plastic to addan average of $2,169 to their overallindebtedness by graduation.

Credit cards create an illusion of finan-cial independence that is often too tempt-ing to freshmen starting out on their own.At first students may vow to use their cardonly for emergency purposes, but manyfall into the bad habit of using their plas-tic to pay for everything from textbooks

8 STUDENT AID TRANSCRIPT Vol. 19, No. 3, 2008

Credit cardscreate an illusion

of financialindependence that

is often tootempting to

freshmen startingout on their own.

to pizza. Students are often unaware of therisks of credit card use, and many accu-mulate more debt than they can handle.

Breaking New GroundMany colleges and universities now offerprograms to teach students importantfinancial literacy skills. Texas TechUniversity in Lubbock was one of thefirst schools to help students by advocat-ing responsible financial behaviorthrough increased financial education.Started in 2001, the university’s pioneer-ing Red to Black program provides freefinancial planning, counseling, and semi-nars for students.

Dottie Durband, professor of personalfinancial planning at Texas Tech, devel-oped the Red to Black program and servesas its director. “Developing a budget setsthe foundation,” says Durband. “It is atool to discover where students are finan-cially. If they are in the ‘red,’ it helps themget to the ‘black.’ And if they are alreadyin the black, budgeting skills help themstay in the black.”

The program was created as a campusstudent organization under the Divisionof Personal Financial Planning. Durbandbelieves that training students to serve ascounselors to their peers is the bestapproach, although the key is simply tofind any way to connect to students.

“It’s about experiential learning,” saysDurband. “Students are afraid of theword ‘budget.’ Call it a spending plan—it doesn’t matter—just provide them withthe help and resources needed to learnhow to manage money.”

Becky Wilson, Texas Tech’s financialaid director, says Red to Black is recog-nized as the university’s best resource tohelp students manage their money. “Somestudents get into trouble before they real-ize what has happened. Knowing whereto start is a big thing and this programhelps students get their finances organ-ized,” says Wilson. She adds that budg-eting is now a required component offreshman orientation.

Red to Black is now a model for otherschools that are developing similar

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programs. Durband has advised 24universities—including The Ohio StateUniversity, Texas A&M University, andthe University of Oklahoma—on how tocreate a student financial literacyprogram.

Kimberlee Davis, a professor of familyand consumer services at Texas StateUniversity in San Marcos, had workedwith Durband at Texas Tech on the Red toBlack program. Davis drew from her expe-rience with Durband when directing therecent launch of a program at Texas State.

Texas State’s program provides onlinefinancial literacy materials to studentsthrough its Money Savvy Cats Web site(www.vpsa.txstate.edu/moneysavvy). Thesite provides money management learn-ing modules, media clips that addressconsumer and financial topics, and linksto other online financial literacyresources. Additionally, Texas State’sprogram trains students to deliver presen-tations on money management to campusorganizations.

Like Red to Black, the goal of theprogram is to provide peer-to-peereducational and budget counseling.Eventually, Davis wants to incorporateconsumer credit counseling services forstudents into the program. “We need toget students more help. I can teach themfinancial planning and how to do abudget, but there is so much more wecan do to help students,” she says.“We’ve made some progress, but thereare so many new issues that spring up,such as identity theft. It’s hard to catchthe curve.”

Conceptualizing Financial Literacy Crafting a financial literacy program iscomplex. Determining what to cover andhow to present the information is only thefirst step. Some schools prefer manda-tory financial literacy courses for allstudents; some find diminishing returnswith this type of “captive audience”format. Some schools seek a comprehen-sive program that addresses each aspectof a student’s financial life; others prefera more piecemeal approach, allowing

students to pick the topics they want tolearn about.

Likewise, there are many differentmethods to educate students about finan-cial literacy topics. Some schools hostworkshops and traditional classroom-based academic courses; others use indi-vidual counseling or student mentorprograms. Many schools offer Webcontent such as online courses, videos,and other on-demand media about finan-cial literacy.

To help determine what informationstudents need and the best method forconveying it, some colleges hold annualfocus groups. Surveying faculty membersand other student service-oriented officescan also yield ways to shape a school’sfinancial education program. “Theimportant thing is to be inclusive andopen to suggestions,” said one financialaid director.

Securing Approval and FundingFor most schools, designing the programis relatively easy compared to getting theapproval and funding to make theprogram happen. “I think the hardestthing is getting the initial buy-in,” saysDanielle Champagne, the assistant direc-

tor of the Student Money ManagementCenter at the University of North Texas(UNT) in Denton. “Luckily, most peoplewill see the benefit of having a financialeducation program on campus.”

As with any new initiative, it becomesan issue of finding resources and deter-mining logistics. “Having a solid busi-ness plan is key,” continues Champagne.“You have to have a clear vision of whereyou want the program to go.” The busi-ness plan should also reflect theprogram’s goals and match the school’sculture, according to Champagne. “Wecreated the goals and mission at the sametime and wove them together. Our goalwas to create a culture of financial liter-acy. We have a long-term vision ofempowering students.”

Usually, the most challenging aspectof starting a new financial literacyprogram comes in finding the funds forit. Robert Weagley, chair of the PersonalFinancial Planning Department at theUniversity of Missouri-Columbia, over-sees a program in an ideal situation.Because the financial counseling centeris tied to a degree-granting department,its funding comes from course fees. Whenthe program started three years ago, hepledged that all the student fee revenuewould be given back to students.

While not every program can be fundedin this way, there are a variety of fund-ing sources available. Many programsrely on fees assessed to every student;others seek outside grants and alumnidonations. Some programs also receivefunds from for-profit financial institu-tions such as banks and insurance compa-nies. Programs should seek multiplesources of funding to assure that moneywill be there should one source dry up.

Implementing the ProgramAfter securing approval and funding,enthusiasm can carry a financial literacyprogram a long way on the path tosuccess—but it’s important to havereasonable goals. Champagne stresses theimportance of starting small, beingpatient, and expecting a few lean years at

NATIONAL ASSOCIATION OF STUDENT FINANCIAL AID ADMINISTRATORS 9

Crafting afinancial literacy

program iscomplex.

Determining whatto cover and how

to present theinformation is only

the first step.

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10 STUDENT AID TRANSCRIPT Vol. 19, No. 3, 2008

literacy programs in the first place: toimprove the lives of students. The finan-cial aid community is passionate in itsdedication to this goal, and in seeing thetangible rewards for their students. Cham-pagne describes the positive reactionamong students: “When you’re talkingabout their financial situation, it’s verypowerful because it’s an important partof their life. Students respond and theykeep coming back.”

When it comes to helping studentsachieve better financial lives, no goal istoo lofty for many administrators. TheUniversity of Missouri-Columbia’sWeagley expresses his commitment tohelping students this way. “People justdon’t know enough about their financialwell-being. It’s an essential mission. Theworld can be saved one financial coun-seling center at a time.”

Matt Smith is Financial Literacy Program

Manager for TG. He may be reached at

Matthew.Smith@tgslc.com. Information for

students about managing credit and debt

is available at www.aie.org/College/Paying/

Earning/Credit/index.cfm

first. “In 2005, we started with an idea,the support of our vice president, and aglass office with three desks and nocomputers,” she says.

Participants at a recent symposium onfinancial literacy discussed the impor-tance of discovering a program’s charac-ter and strengths, and focusing on themduring the initial development period.“Find out what you’re really good at andstart with that; do that piece and get somerecognition, and then build on it,” saidone financial aid director.

Once the program’s identity has beenestablished, it’s crucial to promote theprogram to students. In Champagne’sexperience, marketing a new programmust be a top priority because financialadvising programs are still a relativelynew presence on campuses throughoutthe country. “We’ve found that moststudents will expect a career center oracademic support services, but they don’texpect money management resources,”she says.

New programs have to be willing to gettheir messages out by whatever methodit takes to reach students, and to do sorepeatedly. Flyers, bus ads, Web sites,booths in the student union, and socialnetworking sites like Facebook are just a

“Students won’tknow you’re there

unless you’rewilling to be

persistent andunashamed to tellthem 500 times

that you exist andyou can help,”

says Champagne.

few of the ways program administratorscan reach students. “Students won’t knowyou’re there unless you’re willing to bepersistent and unashamed to tell them 500times that you exist and you can help,”says Champagne.

Taking the Next StepOnce a program has been established andenjoyed some success, program adminis-trators should stay focused on achievinglong-term goals. There are many thingsadministrators should consider in order totake their program to the next level.

Making a financial literacy program anintegrated part of campus life is an impor-tant long-term objective. Champagnestresses the need to work closely withother campus offices in order to addressall aspects of students’ financial concerns.“So often in higher education, there aresilos between the academic side andstudent services,” she says. “We work tobridge that.”

Because financial problems seldomoccur in isolation, UNT’s Student MoneyManagement Center communicates withother campus service providers. “We seelots of issues with compulsive spending.There might also be academic, social,emotional, or mental health issues atwork. So we have very close connectionswith other offices on campus. We referto other offices as often as possible,” saysChampagne.

Setting measurable goals for improve-ment and evaluating student response tofinancial literacy initiatives is essential.Student surveys provide a key method ofachieving one essential goal of any finan-cial education initiative—expanding therange of programming offered—byrevealing what new services or topicsstudents are interested in. Champagnesays, “We want to continue to expand thedepth of our programming and create newtopics and new areas of exploration,because students’ financial lives only getmore complex.”

Ultimately, the purpose of measuringoutcomes and expanding services paral-lels the purpose of setting up financial

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