If the recent downturn in the economy has shown anything, it’s that a lack of financial literacy extends to all levels of society—including college students. We all know by now that by extending mortgages to people who were not likely to fulfill their financial obligations, companies like Fannie Mae and Freddie Mac precipitated the crisis. Yet consumers hold some responsibility, as well. College students above all need to understand the fundamentals of managing their own finances—especially with regards to credit. According to the JumpStart Coalition for Personal Financial Literacy funded by Merrill Lynch, the average score of college students on their financial literacy exam was 62 percent. Anyone who has taken the exam in a Principles of Economics class knows that the score among students at Columbia is several points higher than the national average. Yet among the undergraduate student body nationally, one could only wonder what such an exam could reveal. Most likely, even at an Ivy League school such as ours, there may be a fundamental lack of knowledge concerning personal finance.
Arguably, it is the job of parents and life experience to teach us how to manage our money correctly, but this only goes so far, and we cannot assume that these experiences are universal. Some minor adjustments, even here at Columbia, could offer students an opportunity to increase and maintain their financial knowledge. A simple solution could be the offering of periodical “power half-hours” that help introduce students to some basic financial terms and also to complicated financial processes. Ideally, the financial aid advisers and Student Financial Services could undertake this effort. These workshops would function very much like those that the Center for Career Education offers. Student Financial Services could also help promote financial literacy and competency in personal finance management by sending out periodical pamphlets concerning and explaining some of the issues that could impact the students both directly and indirectly. As much as we all hated being required to attend certain events during freshmen orientation, it would beneficial for most students to have a discussion on personal financial management. After all, as we all remember our experiences, or lack thereof, during Under1Roof, it is probable that we would not be able to forget a half-hour discussion on helpful reminders of how to avoid incuring trench-like debts.
The University should also require more services from those creditors seeking to be on Columbia’s recommended list of loan agencies. Last year, there was quite a stir when the University community learned that the former head of financial aid owned stock of Student Loan Xpress, which was on the University’s recommended list. The attorney general of New York filed suit in September 2007 and the University worked quickly to impose oversight on the financial aid office. Nonetheless, student and parent confidence in our Office of Financial Aid may have faltered somewhat with this discovery. In order for Columbia to ensure the transparency of its process, the University should require companies on the list to conduct financial literary workshops of some nature several times during the academic year. It is one thing that parents and students take out exorbitant loans just to finance their attendance here. It is quite another for the University to treat the students, who they are supposed to be educating, like customers instead of pupils.
Students learn a lot a lot in college, but as national tests show, perhaps not enough in the more pedestrian topic of managing one’s finances. A veritable army of jargon appears when one reads the fine print of a credit card agreement for the first with terms like “APR”, “Prime Rate,” and “variable rates.” Seeing as how access to credit is determined by some enigmatic formula called the “Credit Score,” which is determined by something called a “FICO,” students should learn about this from someone other than the guy trying to get them to open an account in front of the 116th Street gates during orientation week. Some students and their parents must take out large loans in order to finance their education here at Columbia, and seeing that the University has had its own issues with “recommended” loan agencies from last year, we feel it’s the responsibility of the school to offer these services. So in the spirit of the JumpStart Coalition’s proclamation of April as “Financial Literacy Month”, let’s start getting serious about our financial education.
Raul Mendoza is a Columbia College junior majoring in history. He is the co-director of the education center at the Roosevelt Institute. Kyu-In Lee is a Columbia College sophomore. He is a member of the education center at the Roosevelt Institute.