Study: Students Pursuing Risky Strategies to Cope Financially

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Richmond Times-Dispatch
By: Iris Taylor
March 21, 2010

University of Richmond junior Kerrissa Richards feels blessed. She attends school courtesy of a scholarship that pays 100 percent of her tuition.
Her parents and a grant cover Richards the rest of her expenses. So the 20-year-old biology major, who lives on campus and earns money by tutoring, teaching piano, baby-sitting and assisting at UR's Jepson School of Leadership part time, has money to spend, save, tithe and have fun - and she'll graduate with zero college debt.

Virginia Commonwealth University junior Tiffany Bartlett, also 20, feels stressed. She's living from paycheck to paycheck, trying to make ends meet as she works her way through college as a Spanish education major.

Her mother pays her tuition, and she nannies a young child through an agency to pay a little rent at home and cover her cell phone, car insurance, gas and other expenses, which add up to about $350 to $400 a month.

She does not have a credit card but is strongly considering getting one if she can find a good rate. She definitely needs a second job because things are difficult and she's just barely getting by.

As young college students, Richards and Bartlett are financial neophytes in the world, inexperienced at managing money through any economic crisis, much less a recession that slumped a nation.

But, according to a new study, Bartlett more typically represents how college students nationwide are faring amid economic hardship and uncertainty.

The "Arizona Pathways to Life Success in University Students" (APLUS) study, funded by the National Endowment for Financial Education in Denver, found in its newest sampling of students during the height of the economic crisis in February-April 2009 that:

*The economic crisis has financially hurt the families of students.

*It has hurt students' financial lives and lowered their feelings of financial well-being and confidence managing money.

*There has been a startling upswing in credit-card and education-related debt.

*Students are pursuing risky economic strategies to cope financially.

The study, undertaken in 2008 to track students from their freshman to senior years, said student credit-card debt rose 60 percent and education loan debt soared 85 percent in 2009 over spring 2008.

Those alarming percentages must be put into perspective, though. The average debt balances on which they are based were small at that point in their college career. "The fact that it's spiking up so early is the concern," said Ted Beck, president and CEO of the National Endowment for Financial Education.

Beck said the increased student debt is likely tied to the economy's negative impact on their families, which they rely on for financial support and advice. Obviously, tuition costs are up, he said. "But the opportunities to finance it are constrained."

Job losses and cutbacks in employment hours have eroded family income, he said, and students are having a more difficult time finding part-time jobs and internships.

VCU senior Hien Ta, a 21-year-old biomedical engineering student whose home is in Sterling but who lives on campus in Richmond, said his parents have experienced pay cuts but "fortunately both still have jobs."

He has had to cut out only a few extra things, such as buying computer games and eating out a lot.

"I've had a relatively easy time" financially, he said. He works part time at MCV doing data entry. His parents pay for his schooling and have set aside a savings account for his use. But "I haven't had to touch my savings," he said.

University of Richmond Associate Dean Daniel Fabian said, "A lot of students do have a job, but it's still hard to find them."

To cope with financial pressures, many students in the APLUS study have resorted to dropping classes, taking a leave of absence from school, postponing personal health care and using one credit card to pay off another.

"The increase in risky behavior is a trend that we're very concerned about," Beck said. "The cutting back in classes is the biggest one."

Experts say students who have good basic training in personal finance are better equipped to survive in college.

"Many college kids hit the campuses with little or no training in personal finance," said Gail Cunningham, a spokeswoman for the National Foundation for Credit Counseling.

"Studies have traditionally shown that these same young adults who enter college debt-free end up graduating with significant debt in the form of credit-card debt and/or student loans," she said.

"Further, we've had universities tell us that they've had academically sound students drop out of school in order to go to work to satisfy their debt obligations," she said.

Debt is not such an issue for Bartlett and VCU sophomore Ben Bunyan, although Bartlett has $5,000 worth of outstanding student loans, and Bunyan, an economics and business management major, has "a small educational loan."

Bunyan, a sophomore, said he got good financial training at home.

"I think my parents did a good job teaching me about credit cards and debt when I was in high school," he said. "That's really helping me out. I'm actually having a pretty easy time."

Some of the local students, though, including VCU biomedical engineering major Allison de Groot, a 21-year-old senior, worry about graduate school debt.

"I'm about to go to medical school, and that's where I'm going to be hit with debt," she said. "Med school is going to cost me $150,000. How do you pay off $150,000?"

UR's Fabian said many students are "very concerned" about loan debt, the economy and finding a job. "They're just nervous," he said.

Fabian teaches financial fitness at UR's Richmond College, including how to understand credit and debit cards and how much money students can expect to earn after college.

"I just tell them the realistic picture," he said.

VCU academic adviser Shajuana Payne said incoming students there take a comprehensive introductory course that includes financial literacy.

Also, in partnership with the Virginia Credit Union, VCU conducts an annual financial success summit - daylong money-management workshops open to all students, faculty and staff.

Professor John McFarland of VCU's Department of Finance, Insurance and Real Estate said he teaches money topics mostly to juniors and seniors, including the advantage of using cash versus credit, and how to analyze the full cost of buying such things as vehicles.

His mission is to "create responsible consumers and show them how to make decisions in a different way than they're used to and have been seeing their parents do," he said.

Cherry Hedges, the Virginia Credit Union's financial education director, noted that freshmen are coming into college a little more financially savvy these days. Still, they need a lot more financial training, including about budgeting and the ramifications of going into debt.

The bottom line is, the advisers say, a solid financial education and good money-management skills can help them throughout their lifetime.

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This page contains a single entry by Ernest Roberts published on March 26, 2010 3:01 PM.

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