Changing Landscape of Financial Literacy
December 11 , 2009
This presentation does not constitute formal policy or legal
advice and should not be relied upon as such.
© Student Lending Analytics, LLC
Slide 1
Changing Landscape of Financial Literacy
A Quiz
Suppose you had $100 in a savings account and the
interest rate was 2% per year. After 5 years, how much do
you think you would have in the account if you left the
money to grow?
a. More than $102
b. Exactly $102
c. Less than $102
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Slide 2
Changing Landscape of Financial Literacy
A Quiz
True or False. Buying a single company stock usually
provides a safer return than a stock mutual fund.
Imagine that the interest rate on your savings account was
1% per year and inflation was 2% per year. After 1 year,
would you be able to:
a. Buy more than today?
b. Exactly the same as today?
c. Less than today?
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Slide 3
Changing Landscape of Financial Literacy
Let’s Get Practical
How do I file the FAFSA?
What grants/scholarships am I eligible for?
What are the job prospects and the average wage that I can
expect to earn from my degree in …?
– Based on this, how much debt can I reasonably take on
How can I manage my time best in order to balance work,
family and school?
Build a monthly budget
How can I compare credit card offers?
Develop a financing plan that includes a transition to a four
year institution.
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Slide 4
Changing Landscape of Financial Literacy
Agenda
What is financial literacy?
Why we need financial literacy
What are current federal and state efforts to improve it?
What are various models for delivering financial literacy?
What is the state of financial literacy today based on the
findings from the SLA Flash survey?
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Slide 5
Changing Landscape of Financial Literacy
Definitions
“The process by which people improve their
understanding of financial products, services
and concepts, so they are empowered to make
informed choices, avoid pitfalls, know where to
go for help and take other actions to improve
their present and long-term financial well-being.”
OECD, “Improving Financial Literacy: Analysis of Issues and Policies”
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Slide 6
Changing Landscape of Financial Literacy
Who Says We Need It?
“The number one problem in today's generation and economy is the
lack of financial literacy.”
– Alan Greenspan, former Federal Reserve Chairman
“In light of the problems that have arisen in the subprime mortgage
market, we are reminded of how critically important it is for
individuals to become financially literate at an early age so that they
are better prepared to make decisions and navigate an increasingly
complex financial marketplace.”
– Ben Bernanke, Current Federal Reserve Chairman
From Sallie Mae study:
– 84% of college students said they need more financial education
– 64% wish they had received more financial information in high school
– 40% wished they had such information as college freshmen
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Slide 7
Average Percentage of Questions
Answered Correctly
Changing Landscape of Financial Literacy
Financial Literacy Scores Have Fallen Over 10 Year Period
100%
90%
80%
70%
60%
50%
40%
30%
20%
10%
0%
57%
52%
52%
52%
50%
1997
2000
2002
48%
2004
2006
2008
Source: JumpStart Coalition Biennial Test of Personal Financial Literacy given to high-school seniors.
Notes: From 1997 Press Release: “The 1997 survey results provide a baseline measurement by which to gauge progress toward the coalition's
goal of financial competency among all 12th graders by the year 2007. “
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Slide 8
Changing Landscape of Financial Literacy
Student Debt Growing By 8.4% Annually
Total Student Loans (In Millions of Constant 2008 Dollars)
$100,000
$90,000
Private Loans
$80,000
$70,000
$60,000
$50,000
$40,000
$30,000
$20,000
Federal Loans
$10,000
$0
90- 91- 92- 93- 94- 95- 96- 97- 98- 99- 00- 01- 02- 03- 04- 05- 06- 07- 0891 92 93 94 95 96 97 98 99 00 01 02 03 04 05 06 07 08 09
Source: College Board: Trends in Student Aid
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Slide 9
Changing Landscape of Financial Literacy
Troublesome Debt Levels Exist In Certain Segments
Source: Reproduced from College Board Trends on Student Aid, 2009
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Slide 10
Changing Landscape of Financial Literacy
Defaulted Student Loan Portfolio Balance
Defaulted Federal Student Loan Portfolio
(in billions of dollars)
50.0
$45.6
$39.1
40.0
$31.0
$32.9
$33.6
2006
2007
2008
2009
6.2%
1.9%
16.5%
16.7%
30.0
20.0
10.0
0.0
2005
Annual Growth:
Source: SLA Analysis of FSA Collections Report, August 2009
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Slide 11
Changing Landscape of Financial Literacy
Credit Card Debt
1998
2000
2002
2004
2008
Percentage with credit cards
67%
78%
83%
76%
84%
Avg. number of credit cards
3.50
3.00
4.25
4.09
4.60
Percentage with 4 or more
cards
27%
32%
47%
43%
50%
Average credit card debt
$1,879
$2,748
$2,327
$2,169
$3,173
Median credit card debt
$1,222
$1,236
$1,770
$946
$1,645
14%
13%
21%
16%
21%
Balances between $3K-$7K
Source: Sallie Mae report “How Undergraduate Students Use Credit Cards”
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Slide 12
Changing Landscape of Financial Literacy
Exhibit A: Need For Financial Literacy Programs
Source: Sallie Mae/Gallup survey on How America Pays For College, 2009.
Note: 27% of survey respondents could not answer the question.
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Slide 13
Changing Landscape of Financial Literacy
Exhibit B: PEL Borrowers Not Maximizing Federal Aid
Percentage of Students Taking Out Private Loans
100.0%
90.0%
80.0%
64%
70.0%
60.0%
50.0%
14%
48%
40.0%
11%
30.0%
11%
12%
20.0%
10.0%
Did Not Apply For Federal Aid
Completed FAFSA, No Stafford
Borrowed Less Than Maximum
38%
25%
0.0%
2003-04
2007-08
Source: Project on Student Debt analysis of NPSAS data, August 2009
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Slide 14
Changing Landscape of Financial Literacy
Agenda
What is financial literacy?
Why we need financial literacy
What are current federal and state efforts to improve
it?
What are various models for delivering financial literacy?
What is the state of financial literacy today based on the
findings from the SLA Flash survey?
© Student Lending Analytics, LLC
Slide 15
Changing Landscape of Financial Literacy
Current Proposals in the Congress
State Innovation
Completion
College Access Senate Bill
and Completion
Decider
State Higher Ed.
OR Governor
Secretary of Ed.
Annual
Appropriation
$300 million + $150 $138 million
million match
$250 million
Term
5 years
5 years
5 years
Eligibility
Non-profits
Institutions
States
Non-profits
States
Non-profits (incl.
teacher ed.)
Services
Loan counseling
Default aversion
Reduce debt
Financial literacy
Financial literacy Financial literacy
for groups
Evaluation
historically
Clearinghouse
under-represent.
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Secretary of Ed.
Slide 16
Changing Landscape of Financial Literacy
Credit Card Bill Asks For Report on Financial Literacy
Due nine months after enactment of bill
Report on current state of federal efforts in financial literacy
– K-12
– Postsecondary
– Adults, particularly low and moderate income
Plans to disseminate best practices and high quality curricula
Recommend source of revenue, including credit card transaction
fees to fund literacy efforts on ongoing basis
Six months after report is delivered, strategic plan to be developed
by:
– Secretary of Education
– Director of the Office of Financial Education of the Department of the
Treasury
– President’s Advisory Council on Financial Literacy
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Slide 17
Changing Landscape of Financial Literacy
State of Financial Literacy Programs
Color code:
Source: JumpStart Coalition
© Student Lending Analytics, LLC
Yellow = Requires at least one semester
course
Green = Requires personal finance
incorporated into other subject matter
Red = No requirement
Slide 18
Changing Landscape of Financial Literacy
Agenda
What is financial literacy?
Why we need financial literacy
What are current federal and state efforts to improve it?
What are various models for delivering financial
literacy?
What is the state of financial literacy today based on the
findings from the SLA Flash survey?
© Student Lending Analytics, LLC
Slide 19
Changing Landscape of Financial Literacy
Financial Literacy Delivery Options
Delivery Method
One on One
Group
Online
Brochures/Handouts
Videos
Lectures
Dialogue
Exercises
Experiments
Simulations/Games
Source: Adapted from MoneyU Pedagogy slide
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Slide 20
Changing Landscape of Financial Literacy
Financial Literacy Curriculum Development
Great Lakes Financial IQ
EdFund Building Futures
USA Funds Life Skills
TG Positive Balance
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Slide 21
Changing Landscape of Financial Literacy
NEFE’s CashCourse
Developed by National Endowment for Financial Education
Available at no charge to schools; over 300 schools registered
Five modules with over thirty sub-modules:
–
–
–
–
–
Financial Basics
Paying for College
College Life
World of Work
Economic Survival Tips
Tools include interactive budget, financial calculators and worksheets
Self-paced program delivery with links to series of articles
Lists most popular topics for given school
Participating California schools include Los Angeles Harbor College,
UC system, Stanford University and Scripps College
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Slide 22
Changing Landscape of Financial Literacy
Virginia Tech Program
Introduced to freshman class who are strongly encouraged to complete
Online class administered through their Blackboard system
Each module has learning objectives, presentation, activities, resources
and a quiz
Seven modules on following topics (20-30 minutes per topic):
–
–
–
–
–
–
–
Budgets
Account management
Credit cards
Debt management
Other benefits available
Loan management
Consumer rights and responsibilities
Final exam is 25 true/false questions drawn from pool of 100 questions
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Slide 23
Changing Landscape of Financial Literacy
Community College Programs
Terra Community College offers Financial Literacy 101 Course
South Mountain Community College
– Collaborated with Joyner Walker Foundation
Doorways To Dream Fund seeking 5 community colleges to test
financial literacy games
Elgin Community College uses Financial 101 curriculum developed by
Decision Partners
IHEP Symposium on Financial Literacy
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Slide 24
Changing Landscape of Financial Literacy
Texas Tech University “Red to Black” Program
Peer counseling program that offers free financial planning, counseling
and workshops
Focused on topics such as:
–
–
–
–
Creating a budget
Establishing credit
Saving money
Repaying debt
Peer counselors are juniors, seniors or graduate students in TTU
Personal Financial Planning Program
Walk-in appointments available as well as scheduled appointments
Collaborates with financial aid, student wellness center, resident life
Serve both school and surrounding community
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Slide 25
Changing Landscape of Financial Literacy
Successful Attributes
Relevance with rigor
– Financial products change
– Financial products have complexity
Focus on application and problem solving, not just “book learning”
– Let students make mistakes when they don’t matter
Actively engages students through variety of media
Sustained efforts vs. one-shot deal
Zeal for evaluation…please, please, please measure results
–
–
–
–
Pre- and post-test results
Self-reported progress
Most important lessons learned
Behavioral: debt levels?
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Slide 26
Changing Landscape of Financial Literacy
Agenda
What is financial literacy?
Why we need financial literacy
What are current federal and state efforts to improve it?
What are various models for delivering financial literacy?
What is the state of financial literacy today based on
the findings from the SLA Flash survey?
© Student Lending Analytics, LLC
Slide 27
Changing Landscape of Financial Literacy
Profile of Survey Participants
School Type
School Ownership
50%
40%
30%
20%
10%
0%
50%
40%
30%
20%
10%
0%
4-year private
4-year public
2-year public
Other
Private
Public
Other
School Size
50.0%
40.0%
30.0%
20.0%
10.0%
0.0%
501-2,500
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2,501-7,500
7,501-15,000
More than
15K
Slide 28
Changing Landscape of Financial Literacy
Prevalence of Programs
Percentage of Total Respondents
60%
50%
48%
43%
42%
40%
28%
30%
20%
10%
0%
Overall
4-year public 4-year private 2-year public
Survey question #1: Does your institution currently offer a financial literacy program beyond standard entrance
and exit loan counseling to your students?
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Slide 29
Changing Landscape of Financial Literacy
Budget For Financial Literacy?
Percentage of Total Respondents with Literacy Program
70%
64%
60%
50%
40%
30%
27%
20%
8%
10%
0%
Yes
No
Not Sure
Survey question #4: Does the financial aid office currently have any budget for financial literacy activities?
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Slide 30
Percentage of Total Respondents with Literacy Program
Changing Landscape of Financial Literacy
Financial Literacy Topics
100%
94%
86%
90%
80%
86%
73%
72%
70%
60%
52%
50%
40%
30%
20%
10%
0%
Budgeting
Loan
Repayment
Credit Cards Credit Report
Privacy
Scholarships
Survey question #9: What are the topic(s) covered by your financial literacy training? Please select ALL that
apply.
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Slide 31
Changing Landscape of Financial Literacy
Financial Literacy Topics (Continued]
Percentage of Total Respondents with Literacy Program
90%
80%
70%
60%
50%
45%
44%
40%
39%
38%
30%
22%
20%
17%
10%
0%
Checkbook Student Loans
Issues
Investing
Earnings
Potential
Auto Loans
Other
Survey question #9: What are the topic(s) covered by your financial literacy training? Please select ALL that
apply.
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Slide 32
Percentage of Total Respondents with Literacy Program
Changing Landscape of Financial Literacy
Program Delivery
90%
80%
79%
70%
60%
53%
46%
50%
39%
40%
30%
16%
20%
10%
0%
In-person group Reference page
workshops
on financial aid
website
Handouts
available upon
request
On-line tutorials
Other
Survey question #6: How does your institution administer the financial literacy program?
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Slide 33
Changing Landscape of Financial Literacy
Responsibility for Program
Percentage of Total Respondents with Literacy Programs
90%
83%
80%
70%
60%
50%
40%
30%
21%
20%
16%
9%
10%
6%
7%
1%
0%
Financial
Aid
Student
Affairs
Academic
Dept.
Business
Office
Students
Admissions
Other
Survey question #5: Which department at your institution is responsible for the financial literacy program?
Please select ALL that apply.
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Slide 34
Changing Landscape of Financial Literacy
Conducts Financial Literacy Sessions
Percentage of Total Respondents with Literacy Program
90%
80%
75%
70%
60%
50%
40%
30%
21%
20%
20%
11%
10%
16%
7%
7%
Students
Servicer
0%
Financial
Aid Office
Guarantor
Academic
department
Lender
Other
Survey question #8: Who is responsible for conducting the financial literacy workshops? Please select ALL
that apply.
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Slide 35
Changing Landscape of Financial Literacy
Content Development
Percentage of Total Respondents with Literacy Program
90%
80%
75%
70%
60%
50%
39%
40%
30%
21%
20%
17%
22%
15%
9%
10%
0%
Financial
Aid Office
Guarantor
Lender
Academic
department
Servicer
Students
Other
Survey question #7: Who develops the content for your financial literacy program? Please select ALL that
apply.
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Slide 36
Changing Landscape of Financial Literacy
Percentage of Students Impacted
Percentage of Total Respondents with Literacy Program
40%
30%
31%
30%
18%
20%
14%
10%
7%
0%
0-10%
11-25%
26-50%
51-75%
Over 75%
Survey question #10: What do you estimate is the percentage of students served by your institution's financial
literacy program?
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Slide 37
Changing Landscape of Financial Literacy
Self-Evaluation
Percentage of Total Respondents with Literacy Program
50%
40%
40%
30%
27%
22%
20%
10%
9%
2%
0%
Excellent
Very Good
Good
Fair
Poor
Survey question #12: How would you rate the current financial literacy program at your institution?
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Slide 38
Changing Landscape of Financial Literacy
Popular Financial Literacy Programs
CashCourse
15
Guarantors - Gen.
9
Lenders - Gen.
8
EdFund
6
NSLP
6
USA Funds
6
Dept. of Ed.
4
Great Lakes
4
TG
4
Texas Tech
4
Access Group
3
0
5
10
15
20
Survey question: What source(s) would you recommend for a financial aid administrator interested in
developing a financial literacy program for his/her institution?
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Slide 39
Changing Landscape of Financial Literacy
Recommended Sources
Fifty sources for financial literacy content identified by one hundred
survey respondents
For complete list of sources recommended, visit the link below:
http://studentlendinganalytics.typepad.com/student_lending_analytics/
2009/09/which-financial-literacy-programs-are-most-popular-withfinancial-aid-community.html
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Slide 40
Changing Landscape of Financial Literacy
SLA Financial Literacy Project
Phase 1: Develop organized list of available resources targeted to
post-secondary students
– Subject content
– Method of delivery
– Include both non-profit and for-profit offerings
Phase 2: Analyze pros/cons of leading financial literacy programs
– Include focus group made up of college students from various school types
– Determine how programs are measuring effectiveness
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Slide 41
Changing Landscape of Financial Literacy
Final Thoughts
Increasing financial education of students a positive…but question
remains what is the most effective way to deliver this information?
You are uniquely positioned to deliver the message
Good news: Lots of financial literacy programs available
Bad news: Lots of financial literacy programs available
Providing effective financial literacy programs to students yield
benefits to schools:
– Higher completion rates
– Lower default rates
– More successful students
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Slide 42
Changing Landscape of Financial Literacy
Questions
????????
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Slide 43
Student Lending Analytics
Contact Information
Tim Ranzetta
Student Lending Analytics LLC
650-218-8408
tranzetta@studentlendinganalytics.com
www.studentlendinganalytics.com
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Slide 44