Money's On the Line During These Classes
Friday, March 30, 2007
Heather O'Brien graduates from Georgetown University this spring with an education in biology, in English, in history. She leaves with a newfound conviction that she should work in the ministry. And with about $63,000 in debt.
"When I got here," she said, "finances were the last thing on my mind. I was on my own for the first time, in a new place. It was very exciting -- and it seemed like college would last forever."
Now, she's taking one last set of classes. It's a sort of Real World 101, a crash course in money: Georgetown is offering a series of financial literacy workshops for seniors, covering such topics as loan repayment and consolidation, spending, credit cards, taxes and benefits.
The professors and other financial experts leading the classes all say the same thing: If only I'd known this when I was your age.
"These are lessons best learned young," said adjunct business professor Michael Ryan, "when there's not a lot on the line."
Students are leaving college with more debt than ever, now that more of them have to rely on loans, tuition keeps rising and credit cards are being pushed on many campuses. The median education loan debt is nearly $20,000 for full-time students at four-year colleges. And that's not including credit cards; more than half of students surveyed this winter by Sallie Mae had piled on more than $5,000 in debt in school. And one-third added more than $10,000 in credit-card debt.
Some students treat credit cards and student loans like found money, for spring break trips or betting on NCAA brackets. But many are struggling to afford college; nearly a quarter charge part of their tuition. And most need to get used to managing expenses, learning -- often the hard way -- as they go along.
Now some schools are adding courses on financial basics. Beginning this academic year in Virginia, for example, public universities are required to offer some financial literacy training, said Barry Simmons, Virginia Tech's director of scholarships and financial aid. The school designed an optional online class, covering budgeting, credit cards and other basics for freshmen. The University of Virginia has a pilot program, too.
Financial companies offer occasional courses on campus, and some have pitched in on the Georgetown classes. The added focus comes as scrutiny on universities' relationships with lenders increases and as Congress moves to ease the burden on students.
Some students arrive on campus used to managing credit, balancing budgets, maybe even trading stocks. But others --
"We get the sense that students don't really understand how money works," said Greg Pasqua, a senior at Georgetown who heads the student-run credit union and helped organize the seminars. "People do things that aren't very intelligent with their money. Overdraw accounts six times on $2 purchases, and get hit with six fees for buying bubble gum. Or get reported to Equifax because you didn't pay your loan on time, and you're like, 'I'll get it next time.' "
Ryan said, "It's amazing what some students don't know -- that 30 to 40 percent of their proceeds will be taxed away . . . Even basic things like 401(k)s," or whether they should put money into the pretax retirement savings accounts.