Money Matters
ON CAMPUS
How College Students Behave
Financially and Plan for the Future
2015
How College Students Behave Financially
and Plan for the Future
Money Matters on Campus details the findings of a survey of 42,000
first-year college students from across the U.S. conducted by EverFi
and sponsored by Higher One. Students were surveyed on a variety of
pertinent topics around banking, savings, credit cards, and school loans.
This report outlines the survey’s key findings, examining the financial
attitudes and behaviors of students to better understand what most
significantly predicts positive and negative financial outcomes.
www.moneymattersoncampus.org
Table of Contents
Executive Summary
4
Introduction 5
Methodology and Demographics
7
Results Brief
8
Results 10
Financial Behaviors
10
New Behaviors for 2014—2015
14
Financial Attitudes
15
Financial Knowledge
19
Financial Stress
21
Conclusions and Implications 27
References 30
Collaborators32
Executive Summary
As the number of students attending institutions of higher education has
steadily increased over the past decade, tuition rates have concurrently
swelled in kind, pushing an unprecedented number of young adults
with sizeable student loan debt into an unstable job market. It is more
important than ever that college students are equipped with the knowledge,
perspectives, skills and habits to successfully navigate the fiscal burdens
that stand in the way of their financial independence.
This study aims to encapsulate a variety of influences on the development
of financial capability into an ecological model that provides a framework
for understanding how to best support the next generation of adults in
achieving their financial goals. EverFi and Higher One have conducted
intensive research into the financial attitudes, knowledge and behaviors
of college students for three years, with representative samples averaging
more than 50,000 students per year. Overall, the data suggest that
financial experience among incoming college students has increased, but
there has not been a concurrent increase in basic finance management
skills or fiscal planning. Findings continue to note independent effects of
knowledge, attitudes, behaviors and financial stress on the fiscal capability
of young adults. This analysis not only provides insight into the context
within which financial literacy develops, but also highlights the various
domains within this life skill and the necessity for early exposure to
financial literacy education and personal experience.
Policy makers, practitioners, educators and researchers are encouraged
to consider the larger context within which young adults learn to become
autonomous agents in their financial future. Significant progress has been
made in the development and encouragement of financial literacy education
for all students, but more work needs to be done to support responsible
financial behavior throughout development and educate young adults on the
significant impact student loans can have on their well-being.
4
Introduction
Throughout the past decade, outstanding student loan debt has increased
at an alarming rate in terms of both the number of students taking out loans
and the average size of those loans (Monge-Naranjo, 2014). Along with
steady increases in tuition rates, new college graduates face an unstable
job market, with graduates aged 21-24 having an 8.5 percent unemployment
rate and 16.8 percent underemployment rate (Shierholz, Davis, & Kimball,
2014). Further, delinquency and default rates are increasing over time,
especially among students who do not graduate. In fact, borrowers who
dropped out of college without earning a degree were more than four times
more likely than those that graduated to default on their loans, 16.8 percent
versus 3.7 percent (Ngyen, 2012).
Ratcliffe & Mckernan (2015) recognize that “growing student loan debt
has contributed to generations X and Y having less wealth than their
parents’ generation at the same age 25 years ago.” A growing number
of young adults are delaying personal and financial life goals including
continued education, marriage, having children and financial independence
(Gale, 2014). Student loan burdens can prevent young adults from saving,
investing, building credit and buying a home. It is not surprising that Gallup
(2014) recently found that the overall well being of college graduates was
directly tied to the total amount of loans borrowed to finance their education.
Currently, more than half of those with student loans report being concerned
about their ability to repay the debt (Ratcliffe & Mckernan, 2015). One way
to steel future generations against the sizeable fiscal challenges that await
them upon graduation is to provide a solid, engaging education in financial
literacy that works to improve their knowledge, attitudes and behaviors.
Financial education has been shown to improve the quality of fiscal
decisions, but levels of financial literacy and promising financial behaviors
among young adult consumers suggest an increased need for policies
that promote financial literacy education at scale (Finke & Huston,
2014). Financial capability is not only correlated with individual outcomes
(debt reduction, bankruptcy prevention, less stress), but also with broad
5
economic development that impacts everyone (job growth, borrowing rates,
investments). However, there is still not a consensus on the efficacy and
best practices associated with broad financial education for young adults
(Lusardi & Mitchell, 2013).
Much of this discrepancy is due
to the misperception that financial
Philosophical
and Ideological
Policy and Systems
Community/Organization
Interpersonal
interventions should generate large,
Unit of Practice for
Behavior Change
Individual
uniform behavioral changes for
students (Mitchell & Lusardi, 2015).
It is important to understand that
financial literacy development does
not take place in a vacuum—it is
surrounded by overlapping spheres
of influence. To that end, it becomes
extremely important to understand
the context within which young adults
are acquiring fiscal knowledge,
skills and perspectives. Wendy Way
(2014) suggests an ecological model
to connect the disparate facets
Financial
Literacy Goals
SPACE OF
EDUCATIONAL
INTERVENTION
Educational
Outcomes
Consumer
Financial
Behavior
AFFORDANCES OF TECHNOLOGY
Learning Tasks and Processes,
Motivation, and Accessibility
LEARNER
Learner Characteristic, Prior Knowledge
and Skills, Trigger Events, Learning Context
that influence financial capability
development—just as similar models
Figure One
have been successfully employed
to promote behavior change in the public health domain (Figure One).
Using this framework, combined with the vast wealth of survey data on the
attitudes, experiences and plans of college students, this research report
provides context around how financial literacy development takes place for
young adults on campuses.
Financial literacy education is becoming
increasingly more prevalent in high schools
“Financial behavior is not just a function
and colleges in the U.S. and this study has
of factual knowledge and skills, but also a
the unique opportunity to provide insight to
complex array of other personal, interpersonal
professionals in higher education regarding
the personal, community and policy factors
and environmental factors.” (Way, 2014)
that have the most influence on financial
knowledge and behavior.
6
Methodology and
Demographics
In a continuation of the collaboration between EverFi and Higher One, data
was collected from approximately 42,000 college students across the U.S.
on their financial attitudes, behaviors and knowledge. The majority of the
financial literacy survey questions were retained from 2012 to the present
study. Students were surveyed on a variety of pertinent topics around
banking, savings, credit cards and student loans. The survey was deployed
just before the implementation of an online education program on college
wellness, primarily at the beginning of the fall 2014 semester. The majority
of participants (90.5 percent) were first-year college students (mean age
= 18.6 years). Most students (75 percent) were 18 years old and another
eight percent were 19 years old. All students were enrolled in traditional
four-year public and private colleges or universities across the U.S.
The sample was demographically representative of American college
students, with 55.5 percent of respondents being female and 68.3 percent
Caucasian/white (non-Hispanic). Additionally, 70 percent of students had at
least one parent with a college degree. Students were almost entirely from
four-year public (70 percent), private (17 percent) and private religious (12
percent) institutions. These samples have remained very similar across the
three years of the study.
In order to expand the breadth of the survey’s insights this year, a small
sample of approximately 1,000 students from several two-year institutions
across the country was compiled to more closely investigate the unique
strengths and challenges these young adults possess related to financial
literacy development and education. These students were 58 percent female
and 83 percent Caucasian/white (non-Hispanic). Only 50 percent were firstyear college students, while 40 percent were 18 years old, 25 percent were
19 years old and 32 percent were 20 years old. Sixty-four percent had at
least one parent with a college degree.
7
Results Brief
This investigation comparing data collected from 2012-2015 revealed
several interesting trends in the responses of college students. Young
adults reported increased experience in high school with credit cards,
bank accounts and the expected acquisition of student loans. Even
though respondents stated that they were anticipating borrowing more
and more frequently, they had fewer plans for repaying those loans.
In general, responsible planning behaviors decreased over time, but
risky financial moves such as using payday lenders or taking out cash
advances on credit cards, remained stable. Students from two-year
institutions reported more experience with money management, less
and smaller loans, and more responsible behaviors than their peers
from four-year institutions.
In a continuation of efforts from previous years
Questions assessing financial knowledge proved
to determine which attitudinal perspectives are
to be quite difficult for the students in this year’s
the strongest predictors of financial literacy and
sample, but the number of correct responses
behavior, this study conducted a factor analysis of
increased with an individual’s personal experience
the questions that have remained consistent across
with money management and financial literacy
the three years of this research endeavor. The larger
education. Students at private four-year institutions
factor structure remained intact over time, including:
generally had more financial knowledge than their
Cautious Financial Attitudes, Indulgence for Status
peers at four-year public schools. However, students
and Social Gain, Utilitarian Financial Behavior, Debt
from two-year institutions had the most correct
as a Necessity, Possessions Providing Happiness,
answers on average when compared to other groups.
Spending Compulsion and Aversion to Debt. However,
Findings supported the independent influences of
several items shifted between constructs, and
both financial experience with a checking account
another factor—Financial Contentment—emerged
and financial literacy education, especially in
from the data this year. These financial attitude and
students from two-year institutions—which provides
behavior factors proved to be strong predictors of
a unique context for this growing, and historically
both responsible and risky fiscal outcomes. Attitudes
under-studied, population.
varied with personal characteristics in a similar
manner as previously found, and community college
students had a more responsible perspective on
financial literacy than students at
four-year institutions.
This year’s investigation also considered how the
emotional and mental impact of fiscal independence
fits into the study’s framework. Financial stress
was found to be only weakly associated with fiscal
attitudes, education, experience or knowledge. The
strongest predictor of increased financial stress
8
was the total amount of student loan debt students
staying organized and managing time and money.
expected upon completion of their program. However,
Consistently, students reported feeling less prepared
students overwhelmingly reported that they were
to manage their money than any other aspect of
most bothered by finding a job after graduation and
college life, though this was greatly improved by
were less concerned with money management and
experience with a transactional bank account and
loan repayment. Interestingly, two-year students not
experience with financial literacy education. Two-year
only experienced more financial stress than four-
students also reported feeling much more prepared
year students, but also were more concerned about
to manage their money and all other aspects of
tuition, cost of supplies, financial aid and how to pay
higher education when compared to four-year
for another year of school.
students, who did not vary among school type. As
might be expected, education and certain types of
Finally, respondents were asked how prepared
they felt to handle several of the challenges that
personal experience were highly related to levels of
self-efficacy in this domain.
students face, including keeping up with coursework,
These results have implications for campus-based financial literacy
education programs—suggesting that it is important for colleges and
universities to be aware of the context surrounding the development
of financial literacy among their student population. The findings also
highlight the importance of attitudinal, behavioral, knowledge-based and
stress-related components in the development of fiscal interventions for
young adults.
9
Results
EXAMINING STUDENT CHARACTERISTICS USING WAY’S
ECOLOGICAL MODEL
This report’s goal is to begin developing a framework for understanding
financial literacy development at the most basic and student-centered level,
and then continue to invite complexity. Findings focus on the individual
characteristics that influence financial literacy and how these interact with
one another and with influences at the community and policy level. Findings
will be presented in four broad domains of financial capability among college
students: Financial Behaviors, Financial Attitudes, Financial Knowledge and
Financial Stress.
Financial Behaviors
EverFi and Higher One have conducted intensive research into the financial
attitudes, knowledge and behaviors of college students for three years, with
representative samples averaging more than 50,000 students per year. This
now allows for the interpretation of linear trends in consistent data points
over time.
FINANCIAL EXPERIENCE
From 2012 to 2014-2015, reported experience of students managing
their own finances has increased. This year’s results showed students
were more likely to have any credit cards as well as more likely to
have more than one. However, they were also more likely to have paid
their credit card bills late and have a larger total outstanding balance.
Respondents were also more likely to report having a checking account
over time and less likely to have a custodial account. Consistent with
the research literature, since the first year of the study, more students
reported taking out student loans (61 percent to 63 percent) and the
total expected balance on those loans increased as well. In 2012, 48
percent of students had loan amounts under $20,000—this fell to 45
percent in 2014-2015.
10
RISKY FINANCIAL BEHAVIORS
The results found no significant linear relationship in a student’s engagement
in risky financial behaviors, which remained stable over time and included
decisions to: write checks without enough money, buy things they couldn’t
afford, make only minimum credit card payments, pay credit card payments
late or compulsive buying.
PLANNED BEHAVIORS
Over time, students have decreased their likelihood of engaging in the
following responsible fiscal behaviors (when asked if they planned to do
so “in the next year”): follow a budget, pay credit card bills on time and
in full, review bills for mistakes, save and invest, contact a credit bureau,
use a debit card rather than credit card for everyday expenses, balance
their checkbooks every month and buy only the things they need (Figure
Two). Further, although students reported taking out more loans with higher
balances, they have become less likely to plan on consolidating loans and
paying them on time and in full (Figure Three). It is important to remember
that many of these students are early in their college careers and have not
yet begun to make payments on their student loans. Young adults should
stay apprised of their outstanding loan balances and what those payments
are likely to be post-graduation while still in school. More opportunities
should be provided for students to learn about possible repayment and/
or consolidation options early on and throughout their college experience.
This may increase the probability that students will handle these payments
responsibly after graduation.
Pay credit card
bills on time
90%
80%
Review bills
70%
Pay entire credit
card bill
60%
Follow a budget to
limit spending
50%
Save and Invest
5-10% of income
40%
30%
Balance checkbook
2012
2013
2014
Contact credit
bureau
Figure Two
11
100%
80%
60%
2012
Paying off loans
2013
Making student loan
payments on time
2014
2013
2012
2014
2013
2012
2014
0%
2013
20%
2012
40%
2014
Consolidating loans
Figure Three
HIGH STAKES PLANNED BEHAVIORS
In terms of the most influential financial plans, responses have remained
stable across time. No linear trend has been found in risky financial plans
(using payday lenders, using a credit card to get a cash loan, overspending
on credit limit, declaring bankruptcy, dropping out of college before earning
a degree or writing a check without enough money in the account). However,
the percentage of students that reported these planned behaviors is
troubling and there was also no increase in responsible financial plans, such
as building an emergency fund or saving for retirement.
12
COMMUNITY COLLEGE SAMPLE
While similar trends were found in the financial behaviors of students
from public and private four-year institutions from past studies, this year’s
responses were also compared to those of students attending two-year
institutions (Table One). Community college/technical college students
reported fewer (44 percent versus 63 percent) and smaller student loans
than the larger sample, but they were more likely to have multiple credit
cards and higher outstanding balances. Students from two-year institutions
also were less likely to be banked than their younger peers at four-year
institutions (82 percent compared to 88 percent), but more often had a joint
or individual account, compared to a custodial account.
TABLE ONE
FOUR-YEAR INSTITUTIONS
(≈42,000)
TWO-YEAR INSTITUTIONS
(≈1,000)
63%
44%
Less than $9,999
25%
51%
$10,000 to $19,999
21%
21%
$20,000 to $29,999
22%
13%
$30,000 to $39,999
11%
9%
More than $40,000
22%
5%
Less than $1,000
76%
54%
$1,000 to $2,499
13%
19%
$2,500 to $4,999
5%
12%
$5,000 to $9,999
3%
9%
$10,000 or more
3%
6%
88%
82%
Your own (individual account)
60%
65%
Joint account
14%
28%
Custodial account
20%
5%
Don't know
6%
1%
Have any student loans?
Outstanding credit balance
Have a checking account?
13
New Behaviors for 2014-2015
This year, survey results for both samples included several novel questions
regarding financial behaviors (Figure Four). Generally, these numbers
were positive, with the majority of students responding that they (at least
occasionally) check their balances and stop spending when resources are
low. Concurrently, few students reported that they avoid checking their
account balances or live paycheck to paycheck. However, perhaps because
they are a bit older, students from two-year institutions reported much
healthier financial behaviors than students at four-year institutions. Twoyear students were nearly twice as likely to keep their receipts and to use
a budget, even though they were 10 percent more likely to live paycheck to
paycheck and four times less likely to have their money managed by their
parents. Both samples reported surprisingly low rates of technology usage
when it comes to personal finance management, highlighting the need to
provide highly connected young adults with education and resources that
they find engaging and effective (Way, 2014).
Comparing four- and two-year college students on
new financial questions included in this survey.
Four-Year Students
17%
4%
12%
Two-Year Students
8%
25% 53%
say they don’t manage
their money; their
parents do it for them
say they don’t check
their balances because
they are too nervous
keep their receipts
16% 26%
62% 83%
39% 60%
live paycheck
to paycheck
check their
account balances
use budgets
72% 87%
14% 18%
stop spending when
their resources are low
have used a money
management app
or program
Figure Four
14
Financial Attitudes
In continuing efforts from previous years to determine which attitudinal
perspectives are the strongest predictors of financial literacy and behavior,
this study conducted a factor analysis of the 37 items that have remained
consistent across the three years of this research endeavor. Changes in
items associated with previous factor analyses are highlighted in Table Two.
FACTOR STRUCTURE CHANGES
While some items within the factors loaded differently than in past years,
and the rank order of the factors changed, it is encouraging to see that the
overall factor of the financial attitudes questions remained relatively intact.
This year, several of the items (which in the past loaded negatively on other
factors), combined to form a new construct, called: Financial Contentment.
These factors, including Financial Contentment, were found to be significant
predictors of financial behaviors including: banking, saving, investing, loan
behavior, credit card behavior and risky financial choices.
15
TABLE TWO: Factor Analysis of Student Financial Attitudes and Behaviors
FACTOR
SURVEY ITEMS INCLUDED IN THE FACTOR:
Cautious
Financial
Attitudes
“The lower a person’s income, the more important it is to save money every month”
“You should always save up first before buying something”
“You should stay home rather than borrow money to go out for an evening on the town”
“Once you are in debt it is very difficult to get out”
“Students should be discouraged from using credit cards”
“I worry about my debts”
“Using credit cards might lead people to spend more money than they can afford”
Indulgence
for Status
and Social
Gain
“I like to own things that impress people”
“The things I own say a lot about how well I’m doing in life”
“Some of the most important achievements in life include acquiring material possessions”
“I admire people who own expensive homes, cars and clothes”
“If I have money left over at the end of a pay period, I just have to spend it”
Possessions
Providing
Happiness
“I’d be happier if I could afford to buy more things”
“My life would be better if I owned certain things I don’t have”
“It sometimes bothers me quite a bit that I can’t afford to buy all of the things that I’d like”
Debt as a
Necessity
“Debt is an integral part of today’s lifestyle”
“Taking out a loan is a good thing because it allows you to enjoy life as a student”
“Students have to go into debt”
“It is better to have something now and pay for it later”
“The longer I wait to start saving for retirement, the easier it will be to save and reach my goal”
“It is OK to have an overdraft if you know you can pay it off”
Utilitarian
Financial
Behavior
“I don’t pay much attention to the material objects other people have”
“I try to keep my life simple, as far as possessions are concerned”
“I don’t place much emphasis on the amount of material objects people own as a sign of success”
“I usually buy only the things I need”
Aversion to
Debt
“There is no excuse for borrowing money”
“Owing money is basically wrong”
“Banks should not give interest free overdrafts to students”
”The things I own aren’t all that important to me”
Spending
Compulsion
“I enjoy spending money on things that aren’t practical”
“Buying things gives me a lot of pleasure”
“I like a lot of luxury in my life”
Financial
Contentment
“I put less emphasis on material things than most people I know”
“I have all the things I really need to enjoy life”
“I wouldn’t be any happier if I owned nicer things”
“It is OK to borrow money in order to buy food”
* New This Year
16
FACTOR ANALYSIS TRENDS
It is slightly difficult to compare attitudinal trends at face value because the
factors did not remain exactly the same across years, but in observing the items
that remained consistent within their constructs across time, college students
have: become more fixated on possessions, less utilitarian, more indulgent, but
less accepting of debt (because it is seen as less of a necessity).
FACTOR VARIATIONS
From 2012 to 2014-2015, healthy financial attitudes consistently increased
with age, year in school and parental education level; and females have
continued to show healthier financial attitudes than males. Consistent with
findings from previous years, financial attitudes displayed more materialism,
more compulsion, less caution and less aversion to debt as time spent on
campus increased. Some of this impact is likely due to the increased financial
experience, older age and less diverse racial and ethnic makeup of students
who took the survey later in the fall 2014 semester or early in the spring
2015 semester.
17
FINANCIAL LITERACY EDUCATION
According to state policies listed in the Council for Economic Education’s Survey
of the States (2014), only 17 states in the U.S. mandate financial literacy
education and only six states require testing of finance management skills for
graduation from high school (Figure Five). College students who graduated from
high schools in states with higher standards for financial literacy education
were more cautious, less accepting/more averse to debt, and less focused
on purchasing and possessions. While this gives some insight into the impact
of broad policy on financial attitudes, only about 40 percent of students from
these states reported they “took a financial literacy course” in high school. Also
noteworthy, impactful experience with a financial literacy course appeared to
be a greater influence on fiscal development than state policy, as students who
reported taking a course in high school were healthier in their perspectives
than those who graduated from one of the states with such a requirement, but
did not indicate they had taken a course.
States Requiring
Financial
Literacy Course
for Graduation:
Alabama
Arizona
Florida
Georgia
Idaho
Louisiana
Missouri
New Hampshire
New Jersey
North Carolina
North Dakota
Oklahoma
Tennessee
Texas
Utah
Virginia
West Virginia
Require Financial Literacy
Course for Graduation
Require Testing of
Personal Finance for
Graduation
Figure Five
States Requiring
Testing of
Personal Finance
for Graduation:
Colorado
Delaware
Georgia
Michigan
Missouri
Texas
18
COMMUNITY COLLEGE SAMPLE
Just as last year, students from four-year public schools displayed generally
more responsible financial attitudes than those from private secular and
religious four-year universities. However, while the two-year college sample was
older and less diverse, community and technical college students reported
being more cautious, less indulgent, less fixated on possessions and much
more averse to debt than the four-year sample, even when compared to
students from public institutions.
Financial Knowledge
College students’ financial knowledge has been found to be a significant
predictor of not only loan debt, but also overall well being (Norvilitis & MacLean,
2010). Based on the work of Lusardi and colleagues, the survey included widely
agreed upon measures of general financial knowledge, covering topics such as
net worth, financial planning, inflation, student loans and credit history.
Similar to previous years’ findings, students on average answered only 2.3
questions out of six correct, and knowledge increased with age, parental
education, healthy financial attitudes and financial experience. Male students
also tended to get more answers correct than their female peers, but
knowledge was not related to time spent on campus, suggesting students
do not gain much objective financial understanding during this brief college
experience.
Private school students generally had more financial knowledge than public
school students. However, students from two-year institutions had the most
correct answers on average when compared to other groups (Table Three). It
can be argued that these two-year students may have the highest degree of
personal financial knowledge due to their age, financial experience and general
lifestyle differences—this two-year sample also reported the lowest rates of
financial literacy education in high school.
This data provides some insights into the independent influences of both
financial experience and financial education on fiscal knowledge (English,
2014). While the survey was not able to ascertain the high school graduation
state of the two-year students, it is clear that those who had personal
experience with financial literacy education scored higher than those who
did not (for both the two-year and four-year samples). Generally, the financial
literacy standards in the high school graduation state of four-year students had
a positive influence on their objective financial knowledge. However, a greater
19
difference in scores was found between students who did and did not have a
checking account (2.27 versus 2.17).
The independent influences of finance education and money management
experience are especially profound in the community college sample. We found
a change in knowledge scores of 0.15 points when comparing the impact
of taking a financial literacy course in high school, but a 0.57 points shift
comparing banked to unbanked students. These findings support the unique
context, strengths and needs of community college students that should be
recognized when studying or providing financial literacy development to this
population (McKinney, Gross, & Burridge, 2014).
TABLE THREE
Took a fin lit course
in high school?
FOUR-YEAR
AGGREGATE
PUBLIC
PRIVATE SECULAR
PRIVATE RELIGIOUS
TWO-YEAR
SAMPLE
(≈42,000)
(≈29,000)
(≈7,000)
(≈5,000)
(≈1,000)
34%
35%
30%
35%
24%
Aggregate
2.26
2.25
2.34
2.22
2.44
Reported Taking
Fin Lit Course
2.28
2.27
2.41
2.28
2.56
Did Not Report
Taking Fin Lit
Course
2.25
2.24
2.32
2.20
2.41
Banked
2.27
2.26
2.36
2.24
2.54
Unbanked
2.17
2.15
2.27
2.16
1.97
HS State Required
Fin Lit Course
2.29
2.28
2.44
2.21
-
HS State Required
Finance Testing
2.36
2.38
2.45
2.27
-
Financial Knowledge
20
Financial Stress
As the myriad of influences on the financial development of young adults
continue to be unveiled, it becomes necessary to also consider the emotional
and mental impact of fiscal decisions. Financial stress has been linked to
negative academic, personal and health outcomes before and after graduation
(Trombitas, 2012). However, less research has been committed to discover how
this personal characteristic fits into the framework of student financial wellness.
Student loan debt has continued to delay young adults’ achievement of
economic milestones; however, when asked what fiscal topics cause them the
most stress, students overwhelmingly reported that they are most bothered
by external factors and are less concerned with money management and loan
repayment (Figure Six).
Which causes you the most stress when you think about finances?
Four-Year Students
Two-Year Students
69% 67%
55% 68%
54% 67%
50% 58%
Finding a job
after graduation
How much tuition
may go up
Cost of books and
school supplies
Having enough money
to last the semester
48% 58%
47% 41%
46% 58%
44% 44%
Applying for
financial aid/having
enough financial aid
Keeping track
of spending
How to pay
for/afford another
year at school
The amount of
student loans I
will be taking out
36% 34%
35% 18%
Overdrafting/
managing a
bank account
Keeping up with
my peers
Figure Six
21
FINANCIAL EDUCATION
While it stands to reason that personal finance education would help mitigate
the stressful impact of fiscal decisions, this is not supported by the results of
this study. There was no significant difference in the reported stress levels for
any of the concepts in Figure Six for students who graduated from a state with
enhanced requirements for financial literacy or students who reported taking
a financial literacy course in high school. Reported levels of financial concern
were also uncorrelated with measures of financial knowledge, which suggests
that the policies and programs currently in place may increase understanding
but not reduce anxiety.
FINANCIAL EXPERIENCE
Financial stress seems to be a valuable addition to the financial literacy
framework, as it does not directly vary with fiscal experience. The analysis found
only negligible to very weak correlations with all financial behaviors, including:
having a checking account, experience with credit cards, number of credit cards
or total outstanding credit card balance. Stress levels did not change in relation
to student age, year in school or the amount of time spent on campus before
being surveyed, although these are all linked to increased experience with
personal money management.
The only fiscal behaviors that moderated financial stress were those related
to student loans. The total amount of student loan debt expected upon
graduation was moderately to strongly positively correlated with stress related
to: the amount loans being taken out, how to afford another year at school,
cost of books, having enough money for the semester and possible tuition
hikes. Student loan debt was also weakly correlated with anxiety in regards to
finding a job after graduation and personal finance management. Further, weak
correlations with financial stress were also found in relation to college students’
planned loan behaviors, although no other planned behaviors displayed a
significant connection with concern over finances.
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FINANCIAL ATTITUDES
Of the constructs investigated, one’s perspective on the importance
of responsible financial behavior, financial independence and wealth
accumulation would be expected to play a role in the amount of pressure one
feels to manage their money. However, this was hardly the case in this analysis,
as only negligible to weak negative correlations to financial stress levels were
found with Cautious Financial Attitudes and Debt as a Necessity factors.
This suggests that financial stress is an issue for all young college students
regardless of their financial experience, financial knowledge or behaviors. To be
truly successful, financial education for these students requires strategies for
reducing anxiety around money management and financial planning. However,
the efficacy of these strategies will depend on characteristics of the
student sample.
DEMOGRAPHIC VARIATIONS
Financial stress seems to be very sensitive to socialization factors as results
showed variations in anxiety levels across several demographic characteristics
(Figure Seven) (Heckman, Lim, & Montalto, 2014). In general, as parental
education level increased, reported financial stress decreased. Female
students reported significantly higher rates of financial stress in all aspects,
but especially when compared to males on the issue of finding a job after
graduation (60 percent versus 78 percent).
Further, Caucasians reported being the least stressed by finances, while
Hispanic/Latino students reported the highest levels of stress across all
categories. These findings are likely tied to socioeconomic status, as parental
education levels among these students also varied in kind. Similarly, students
from public and religious private four-year institutions reported higher levels
of anxiety about finances than their peers from secular private schools (also
probably related to their financial backgrounds). All three groups were most
concerned about finding a job after graduation.
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Interestingly, two-year students not only experienced more financial stress
than four-year students, but also were more concerned about tuition, cost of
supplies, financial aid and how to pay for another year of school, as shown in
Figure Six. Considering that these same students also reported taking out much
fewer and smaller loans, these findings suggest that young adults attending
two-year institutions are relying more on their own resources to finance their
education, and may have more limited means to do so.
Average Percentage of Student Stress Levels
Public
Private - Secular
Private - Religious
Two-Year Institutitions
Male
Female
Parental Education
Some High School
High School Grad / GED
Technical School Grad
Some College
College Graduate
Graduate School
Caucasian / White
Hispanic / Latino
Black / African American
Asian / Pacific Islander
Native American Indian
0%
10%
20%
30%
40%
50%
60%
70%
Figure Seven
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FINANCIAL PREPAREDNESS
Finally, respondents were asked how prepared they felt to handle several of
the challenges that face students in higher education, including keeping up
with coursework, staying organized and managing their time and money (Figure
Eight). Consistently, students reported feeling less prepared to manage their
money than any other aspect of college life. Financial preparedness increased
slightly with parental education, financial literacy standards in high school and
age, but was not related to financial stress, knowledge or any of the attitudinal
factors. Female students reported feeling less prepared than males, and those
who identified themselves as Asian/Pacific Islander felt the least prepared to
manage their own money compared to any other racial/ethnic background.
Reported levels of preparation in four- and two-year students.
Four-Year Students
Two-Year Students
73% 81%
70% 81%
67% 72%
were prepared to keep
up with coursework
were prepared to
stay organized
were prepared to find help
and resources to succeed
63% 75%
58% 71%
were prepared to
manage time
were prepared to
manage money
Figure Eight
Feeling prepared to manage money in college was not related to a student’s
experience with credit cards—it actually decreased as they got cards earlier
in life—or their loan-related behaviors. Respondents with a checking account,
especially an individual account, however, were markedly more prepared
than those who were unbanked. This strongly suggests that experience with
managing a bank account is a key component of developing independent
financial capability. Increased experience with “transactional” accounts for
high school students would be of great benefit to promoting self-efficacy.
Further, while only about a third of respondents had a course in high school
on personal finance management, they were 10 percent more likely to report
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being prepared to manage money in college. Two-year students also reported
feeling much more prepared to manage their money and all other aspects of
higher education when compared to four-year students, who did not vary among
school type. As might be expected, education and certain types of personal
experience are highly related to levels of self-efficacy in this domain.
How prepared young adults felt in managing their money was correlated with
both current and planned responsible financial behaviors, but this analysis
cannot determine if feeling prepared leads one to engage in smarter fiscal
behaviors or if behaving responsibly causes one to feel more prepared.
Regardless, these findings support existing research that finds self-efficacy
in financial management influences the behaviors and intentions of college
students (Xiao et al., 2014).
Increased experience with “transactional”
accounts for high school students would be of
great benefit to promoting self-efficacy.
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Conclusions and Implications
PRACTICE
These findings are valuable for professionals working to improve the state of
financial literacy among America’s young adults. They not only provide insight
into the context within which fiscal capability develops, but also highlight the
various domains within this life skill. Overall, the data suggest that financial
experience among incoming college students is increasing, but there has
not been a concurrent increase in basic finance management skills or fiscal
planning. This is worrisome as students continue to take out more and higher
student loans, affecting their lives both before and after graduation from college.
Educators in high school and postsecondary education should provide students
with more information about the value of a college degree compared to the price
they pay and convey the impact large student loans can have on life after college
(Lee & Mueller, 2014).
Although many college students seem to feel that debt is a necessity for
obtaining a degree and choose to worry about the consequences of their loans
later, there are a number of paths available today that can help young adults
gain an education beyond high school without crippling themselves financially in
the future. Financial literacy interventions should include guidance on the best
programs and financial options for those degrees, as well as continued emphasis
on the impact college loan debt can have later in life.
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Those who develop financial literacy education programs for students should
incorporate structured experience with finance management, as it can be seen
that practice and information play related, but independent, roles in this model
(Danes & Brewton, 2014). Statewide policies that require financial literacy
courses in high school appear to increase overall knowledge gain, but are
less influential in shifting attitudes or changing behaviors and perspectives.
Measures of program efficacy should encompass the development of knowledge
and attitudes, as well as behavioral and socio-emotional impacts. Further,
even though students today are increasingly connected to mobile devices, few
reported having used mobile technologies to perform money management
activities. To build financial capability, financial education programs need to
incorporate technologies being used by young adults and focus on how to
manage finances now, combined with a traditional model that teaches why
money management is necessary for the future.
• Understand the context within which financial literacy is developing
• Measure the various components of financial capability to study their
influence and interactions
• Promote financial education at scale, staring early, and include
experience with transactional accounts designed for students
new to banking
RESEARCH
These findings provide valuable insight into the context within which financial
literacy develops among young adults, but only scratch the surface of the
complexity of Way’s (2014) ecological model. This study focused almost entirely
on the individual-level characteristics that play a role in the development of
financial literacy. Every student will respond slightly differently to individual
interventions, and more data needs to be collected on the characteristics of
programs that are successful at “moving the needle” on student attitudes,
behaviors, knowledge and distress. This includes the structure of the courses,
the makeup of the classrooms, the measures used to evaluate the programs,
and the larger school, community, and geographical cultures within which these
interventions exist.
The dataset compiled by EverFi and Higher One allows not only for the
investigation of financial literacy development among specific sub-groups and
populations, but also for testing more complex behavioral and hierarchical
models. The investigators understand that this analysis likely provides more
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questions than answers for the research field, but welcome collaboration in
determining how to best improve instruments used, examine the data, and test
advanced hypotheses using sound methodology and statistical procedures.
There are still constructs that influence financial literacy development that are
not included in this model and under-researched in the literature in general.
These include the psychological and sociological factors that play a role in this
domain, especially as related to financial attitudes and financial anxiety.
Also to be considered is the lasting impact certain fiscal experiences have on
individuals, including dropping out of college, defaulting on loans and declaring
bankruptcy. Learning more about these experiences will help strengthen the
case for educating young adults about the effects of student loan debt, making
plans early to manage finances and plan for the future, and shifting views on the
importance of financial literacy and the role students play in their
fiscal development.
• Research the larger context of the ecological model presented
• Continue to test more complex behavioral and statistical models to
link all of these influences
• Focus on averting the damaging consequences of current student
loan trends
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References
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Collaborators
ABOUT HIGHER ONE
Higher One partners with colleges and universities to lower their administrative
costs and to improve graduation rates. We provide a broad array of payment,
refund disbursement and data analytics and management tools to institutions
that help them save money and enhance institutional effectiveness. And for
students, we offer financial literacy programs and convenient, flexible and
affordable transaction options to help them manage their finances. Higher One’s
products and services support more than 1,900 schools and approximately
13 million enrolled students.
More information about Higher One can be found at www.higherone.com.
ABOUT EVERFI, INC.
EverFi, Inc. is the leading education technology company focused on
teaching, assessing, and certifying K-12 and college students in the critical
skills they need for life. The company is powering a national movement in 50
states that enables students to learn using the latest technology, including rich
media, 3D gaming, simulations, social networking, and virtual worlds. EverFi’s
AlcoholEdu® for College is one of the few education technology programs
proven to reduce student alcohol use and negative consequences, as
demonstrated through independently conducted, empirical research funded
by the National Institutes of Health. EverFi has reached more than 7 million
students with its online learning platforms.
Learn more at everfi.com.
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