Is
high school getting ahead of college?
Brooke Tacker, posted Nov. 9, 2006
Sitting in her second hour class at 8:40 a.m., a student takes
notes on managing money and the pros and cons of investing.
Two weeks earlier she was learning about the differences in
savings accounts and why saving a portion of one’s money
is smart financial planning. That is where she got the idea
to open her own savings account. After researching several
banks to compare interest rates, she decided to open her own
savings account with a certificate of deposit. This afternoon,
she has a meeting with the bank she chose and if all goes
right, by 4:30 p.m. she will have succeeded in opening her
very own savings account. Now, her mind wanders to how she
can actively apply the information she is learning about investing.
This scenario is of a high school student currently enrolled
in the personal finance class at Hickman High School. Beginning
with this year’s freshmen class, all Missouri public
high school students will be required to take a half credit
personal finance class before graduation.
The idea of beginning personal finance education early on
is a great idea, but it raises the question: What about those
who have managed to escape high school without any personal
finance education and who now are faced with real life financial
decisions? In other words, what about current college students?
In 2005, the average debt of graduating seniors at four-year
colleges in Missouri was $16,505, according to research done
by the Project on Student Debt, a foundation dedicated to
educating students and their parents about student costs and
debt solutions.
So, if the average student debt is increasing, largely due
to student loans, why are college students not required to
be educated about their own finances? Why has it been left
up to them to figure out on their own without any real effort
to inform from outside parties?
“Most students are naive,” MU personal finance
professor Mark Oleson said. “They have this idea that
the university will take care of them and they are caught
up in a student bubble of reality.”
Oleson is right. As college students, we do not think that
a university would take advantage of us by not informing us
of everything that is going on with our parent’s or
our own money. I am not saying that financial aid is trying
to misinform or hinder us in any way, but they do leave it
up to us to figure everything out on our own. If we do not
put some effort into that, then we could end up being in much
greater debt than necessary.
“Many students don’t even realize student loans
have to be repaid,” Oleson said.
He believes that student loans are by far the biggest problem
with a college student’s personal finances. These loans
are not need-based, but rather borrowing amounts are measured
by the average student’s needs. Many students will take
out as much as they are able to, Oleson said, because they
trust and rely on financial aid to know more than they do.
Students will use this excess of loan money to put down payments
on new cars or to pay off credit card debts, not realizing
that the loan money is going to have to be paid back no matter
what they spend it on.
The credit card subject is an issue all in itself.
“The easiest thing to get in trouble with is credit
cards,” Tim Litteken, president of the Clark Lane branch
of Premier Bank, said. “If you miss one payment by as
little as two days, your interests rates could rise 20 percent
and people do not realize this.”
The National Postsecondary Student Aid Study taken in 2003-2004
by the U.S. Department of Education showed that 56 percent
of traditional-age undergraduates owned at least one credit
card. Twenty-three percent of these 56 carried a balance month-to-month
that was on average $1,000. Almost one in four college students
carries a monthly balance on one or more credit cards of $1,000.
Those numbers are ridiculous! I might not know much about
personal finance, but I do know that not paying off one’s
balance in full every month is one of the beginning steps
to a life filled with debt.
“The worst thing is credit card companies who are set
up at enrollment,” Litteken said. “College students
never have enough money.”
Credit cards may seem like an easy solution, but as we learn
in life, nothing is easy.
Falling into his bed after a long day of classes, a college
freshman throws his mail onto his desk in the corner of his
dorm room. An envelope falls on the floor. “Visa”
is written in the return address corner and the student slices
open the envelope. Inside is a credit card with his name already
on it. The card has come with a $500 balance and all he has
to do is call the toll-free number at the bottom of the letter
to activate the card.
The student thinks about this for about 10 seconds then quickly
dials the number. After activating the card, he realizes he
should probably tell his mom. He figures out his responsible
excuse for his decision and explains to his mom that the card
will only be used for emergencies, all the while thinking
about the new X-Box 2,000,000,000 he saw at Wal-Mart the day
before. That night, he stays up until 4 a.m. playing the latest
game on his new system.
Two weeks later, the student receives his Visa bill in the
mail, but he does not have the money to make the payment.
He thinks, “If I am just a few days late, it won’t
be that big of a deal.” Those few days, however, send
his interest rates soaring from eight percent to 28 percent.
Now, he’s stuck and he wishes someone would have just
warned him about this before he made any decisions.
My point in this editorial is to emphasize the importance
of knowing about your own personal finances. No one is going
to be held responsible except you. I think that a one-hour
personal finance course should be required for all incoming
freshmen and another one-hour course for all graduating seniors.
Then, we have no excuses as to why we do not understand the
way the real world works and who knows, maybe those debt rates
will finally start going down.
