Financial literacy can mean ‘live like a student’ now, not later

Indiana University put together its student financial literacy program with few models or guidelines but a lot of passion and an openness to new ideas, Senior Vice President and Chief Financial Officer MaryFrances McCourt told an audience of college and university officials this week.

But something clicked. The program, launched in 2012, has been cited as a national model and is credited with helping reduce undergraduate borrowing by 16 percent over two years, resulting in $44 million in reduced debt for students.

MaryFrances McCourt

MaryFrances McCourt at the National Summit on Collegiate Financial Wellness. Photo by Eric Rudd.

“How can you not be engaged in one of the most critical issues facing our nation?” McCourt said.

McCourt was one of three keynote speakers for the National Summit on Collegiate Financial Wellness, which took place at IU Bloomington and wrapped up today. IU and Ohio State University served as hosts for the meeting, which drew over 200 people from across the country.

IU President Michael McRobbie introduced McCourt, a clear signal that student financial wellness is supported at the highest level of the university. Controlling costs and providing students with the capability to manage debt is included in the principles of the IU Bicentennial Strategic Plan.

The university rolled out its program amid rising national concern about student debt, which had topped $1 trillion and surpassed the nation’s consumer credit-card debt in 2012. The quickly developed MoneySmarts initiative includes for-credit courses, peer-to-peer advising, an interactive website and a podcast series titled “How Not to Move Back In With Your Parents.”

“We wanted everything right away,” McCourt said, and many of the early ideas were implemented.

McCourt said it’s a fact that many families are squeezed to pay for college as a result of stagnant real incomes, declining family wealth and the growing gap between haves and have-nots. But she said much of the conventional wisdom about a crisis of affordability in higher education is not correct. Tuition isn’t skyrocketing. Low-income students have better access to higher education than ever before. A college degree remains a good investment, and it’s getting better.

And while debt is a problem for many students, she said, much of the media and policy attention focuses on the small number of people with extremely high college debt – and on those who borrow excessively to attend the most expensive colleges and universities.

“But again, perception is reality,” McCourt said. And higher education institutions have an obligation to address the perception that students are mired in debt and to head off real problems when possible.

Along with programs aimed at making students more financially literate, IU has taken steps to make it clearer to students just how much they are borrowing – and what it will take to repay their loans. Many students have to borrow, McCourt said. But they’ll be better off if they borrow no more than they need.

“We call it optimal borrowing,” she said. “Not no borrowing, but optimal.”

And that can mean choosing to “live like a student” rather than to rent high-end apartments, go out frequently to restaurants and bars and buy flat-screen TVs and other toys.

“If you’re not living like a student now,” McCourt said, “you’re going to be living like one for the next 10 years.”

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