Student loan debt in the US has managed to top—wait for it—a cool $1 trillion. (Watch it rise $2,726 more every second!)
That horrific figure alone should make it more crucial than ever for college kids to be concerned with their money. But quite the opposite is actually happening.
Per today’s (April 5) fourth annual “Money Matters on Campus” report, conducted by financial management firm Higher One and education company EverFi based a sample of nearly 90,000 US college attendees, students are increasingly uneducated when it comes to personal finance. Less than 10% of students feel they have the information necessary to pay off their loans.
Borrowing money can be confusing, so perhaps that’s understandable—but students are also getting demonstrably worse at far simpler tasks, like making spending budgets and paying credit card bills.
Mary Johnson, who leads Higher One’s student-aid policy team, suggests a possible explanation for the decline in financial literacy: this generation has parents who are less and less confident in their own financial abilities, thanks to the 2008 recession and other adverse economic events.
It could also be that high schools—increasingly swamped with a myriad of educational mandates—are doing as poor job teaching money management. (Another study this week, from PricewaterhouseCoopers, found 92% of K-12 teachers believe financial education should be taught in schools, yet only 31% are “completely comfortable” taking on the task—and a mere 12% actually do it.)
Still, some college students are faring a little better than others. Those at two-year schools showed significantly more financial knowledge and responsibility than their four-year counterparts in the Money Matters survey.
“Many two-year community college students are on their own or working full-time, and they have real financial experience,” Johnson says. “A lot of money management is not just knowing things, but acting and having confidence.” Four-year students, on the other hand, are “maybe focused on some different goals—like seeking the great college experience, wanting to do good in the world,” she adds.
In other words, kids at traditional universities tend to be more idealistic (and also more well-off to begin with), which leads to a kind of free-floating financial naiveté. And that’s fine—until it suddenly isn’t.