Student Debt and the Importance of Financial Literacy
A survey conducted in 2008 by the US Department of Education reflects continued increases in student debt. According to this survey, the average debt of a public university student was about $17,000 in 2004, and it rose 24% to $23,200 in 2008. While an average entry-level job pays $46,000 a year, an average college senior graduates with nearly $23,000 in debt. That’s about half of the first year salary and not including other expenses like insurance, rent, utilities, car payments, etc. These figures clearly emphasize the importance of financial literacy among students, especially in times of economic crisis.
It is becoming more and more difficult for students to pay for school as they face constant increases in educational expenses and the need for higher education in today’s job market. Student loans, therefore, can mean the difference in receiving college education as they make it affordable and allow the students to focus on school by deferring loan payments to when they start earning actual income. The problem with student loans is that they are usually very easy to qualify for. For example, almost any student can qualify for unsubsidized loans by being enrolled at least half time. The interest, however, begins to accrue immediately and can easily add up by the time the student graduates. Repaying debt means postponing savings and can cause unnecessary stress. The Center for Responsible Lending reported that recent graduates spend almost 30% of their monthly income on debt repayment, 20% more than the recommended amount. These payments, along with other expenses like those listed above, leave little or no room for personal savings. Teaching students about money management in as early as high school and first year of college can make a big difference in how they handle the rest of their college experience.
A 2009 study by Sally Mae showed that nearly 85% of undergraduates showed interest in and need for college courses designed to teach money management skills. The University of Texas at Austin, for example, recently began offering BEVOnomics workshops designed to teach students basic personal finance concepts and to provide them with the information and tools necessary to make wise financial decisions. Many other universities provide similar workshops and financial calculators on their financial aid sites. Knowing how to live within a budget and handle credit and debt responsibly can pave the way for a lifetime of financial success.
For Credit and Debt statistics, see here.
360 Degrees of Financial Literacy
Photo courtesy of Flickr.
@ 3:43 pm mike said:
It is a very pertinent post about the student debt and the importance of financial literacy. It is a essential information for every student seeking loan for studies. mortgage refinance
@ 1:07 pm alen said:
Financial literacy is highly recommended for a university student regarding student debt if we carefully consider the survey findings. Since the data seems to be so clear and alarming, it is imperative to impart literacy on this matter. thanks. design a product
@ 2:40 pm saran said:
If you are concerned about the issues of students who have been strained in various ways due to the economic crisis, it is high time to look into their preparedness to face the financial crisis. The students need to be educated on how to handle these issues. Thanks for the nice post. Eviction Process
@ 4:35 pm mike said:
There is increased incidence of insolvency among the students community and the reasons are many and varied. Maximum of these incidents of credit debacle point to the lack of any financial literacy. In view of the stiffening economic crisis, this measure is strongly marked for the students. Thanks for the nice post. junkyard
@ 3:06 pm saloni said:
It is a very pertinent discussion about this issue of debt and financial literacy staring on the face of the students who are not prepared to face in the event of any crisis. It is a must read article. meet single friends
@ 4:11 pm selina said:
I do agree with you that in view of economic crisis, it is pertinent that every student should have financial literacy. This can save them from being trapped in the debt as a result of ever increasing school fees.salvage yards
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@ 12:14 am Edilsa Lopez said:
Great Job Mamura!
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