In a recent report, the U.S. Financial Literacy and Education Commission has stressed the need for higher education institutions to educate students on financial literacy to counter the student debt crisis. This year, around 44 million Americans collectively owe $1.5 trillion in student loan debt.
Not only will it prepare them for the workforce, mandatory financial literacy courses will also help students and families plan and make informed decisions before, during, and after their education.
The report gave five recommendations on how institutions can implement financial education yo guide students in their borrowing decisions.
Promote Transparency of Information
The report suggested that universities provide detailed descriptions of the cost of education and make financial aid letters clearer. A study by New America and uAspire revealed that most financial aid letters did not show cost information while some contained misleading words. Costs after the grants as well as additional fees should be made clear to the students early on in their application.
Require Mandatory Financial Literacy Courses
The Council for Economic Education said in a survey that only 24 states require high schools to have finance courses, and only 18 of them are actually mandatory classes. The report noted that it’s not enough to make the classes available because it may not reach every student and some might not see the value in it.
Understand Individual Circumstances
Various studies and research are available for institutions to use, and the report says they should take advantage of these resources to understand their demographic. Aside from establishing family incomes, these sources can identify patterns in student behavior to help them spot those with potential problems.
Delays in graduation and constantly changing majors are seen as one of the reasons for high student debt. Institutions can alleviate this by actively assisting students in choosing majors that suit their skills and improve their chances of completing their degree.
Prepare Them for Future Obligations
Studies find that an alarming number of students actually do not fully understand or are not aware of the payment options available to them. Institutions can help their students by making budgeting plans and directly connecting them to their student loan servicer. Students can take advantage of the six-month grace period after graduation to prepare themselves for loan repayments.