Iowa universities focus in on 'financial literacy'

New University of Iowa course covers basics in budgeting

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IOWA CITY — Questions posed through a new University of Iowa course might seem pretty basic. Do you spend more than you make? Have you borrowed money? How are you paying it back? Are you saving anything?

Yet many college students — despite having an array of new financial liberties and responsibilities — haven’t thought through those questions or the answers. And that lack of personal finance knowledge, some say, has contributed to the mounting student debt crisis sweeping the nation.

In October, state Board of Regents President Bruce Rastetter addressed the issue of student debt by acknowledging rising tuition rates — which have been driven, largely, by cuts in state support. But Rastetter, as with other higher education officials, also stressed the need to teach students how to manage money, and he charged the three regent universities to develop some type of required financial literacy course.

In response to that call, the board has formed a “financial literacy training work group.” The four member group — including representatives from the board, the UI, Iowa State University and University of Northern Iowa — will gather data, assess options and prepare recommendations to improve basic skills aimed at “reducing student debt through more informed personal finance decisions,” according to board spokesman Josh Lehman.

Possible outcomes could lead the institutions to share services and use orientation structures already in place — such as sexual-assault and alcohol-awareness training that’s required for all new students.

The work group held its first meeting in December and will continue to meet throughout the upcoming semester in hopes of presenting recommendations later this spring, Lehman said. In the meantime, each university is continuing to offer a growing assortment of voluntary financial literacy services — including a new UI course titled, Moneywise: Personal Finance Basics.

Moneywise

The course aims to familiarize students with personal finance basics — budgeting, saving, credit, debt, loan repayment, employment benefits, insurance and investment opportunities. Among other things, the course will help students develop an understanding that “debt is a product”; learn the benefits of savings and compound interest; become familiar with paychecks, taxes and deductions; and create a budget based on their earning potential once they graduate.

“Most students really don’t know anything about personal finance,” said David Baumgartner, assistant provost with the UI Pomerantz Career Center and instructor of the new course.

The class is entirely web-based, although that could change, and students either pass or fail. Those who pass earn two semester hours of credit, but the hope is they gain much more in the form of lifelong money management skills, Baumgartner said.

“I’m excited about the course and hope to wake students up to the whole debt thing,” he said. “But it’s a more comprehensive look at financial literacy, than just debt itself.”

Baumgartner only began teaching the 12-week class last spring, but said it already has become quite popular, with a capacity of 50 students signed up this spring and another 50 on a waiting list.

That demand means it likely will become a regular offering, Baumgartner said.

“I really like the course, and the students seem to like it,” he said. “It’s one of those kinds of courses you get an opportunity to teach and feel like it’s making a difference.”

Positive feedback can be hard to come by in the world of academia, Baumgartner said. But after his first run at the class last spring, several students reached out to share their take-aways.

A large chunk of the Moneywise students are undergraduates in the College of Liberal Arts and Sciences, and Baumgartner said he’d support requiring all new students take some form of financial literacy training.

“This particular class might have a little too much about mutual funds and stocks and bonds,” he said. “But I think a class that talks about debt and savings and insurance and taxes would be very valuable.”

Aaron McElroy, 20, of Fort Dodge, is a UI junior who took Baumgartner’s class in the fall and said it was among the most useful toward both his major and post-graudate aspirations.

“It introduced me to a lot of things I’ll use in the future,” McElroy said. “It gave me a starting point ... for when I have to deal with all this stuff — credit cards and debit cards. I actually started my own savings account because of this class.”

He supported the notion of requiring something similar for all university students, as he hasn’t yet taken out student loans but would use the knowledge gained from the Moneywise course should he decide to do so.

‘A slow turnaround’

According to regents’ reports, 41 percent of seniors graduated without debt from public four-year institutions nationally in the 2012-2013 school year.

In Iowa:

l At the UI, 40.7 percent of all seniors graduated without debt in the 2013-2014 year, up from 39 percent the year before

l 35.8 percent of all ISU seniors graduated without debt in 2013-2014, up from 35.5 percent

l 25.1 percent of all UNI seniors graduated without debt in 2013-2014, up from 23.7 percent.

Sara Harrington, associate director of UI financial literacy and academic progress, said updated numbers for the 2014-2015 school year show continued improvement — 44 percent of UI seniors graduated without debt. The average debt was $27,415, down slightly from $27,581, Harrington said.

“We are seeing a slow turnaround in student debt,” she said. “It was going up. Now, for the first time in a few years, we are seeing it go down.”

Although some have identified student borrowing and spending habits as key to central to solving the debt problem, Harrington said she thinks rising debt levels largely are tied to rising tuition. At Iowa’s public universities, rates for resident undergraduate students have jumped from $2,906 in the 2000-2001 school year to more than $6,600 in fall 2015.

“I don’t think a lot of them are over-borrowing because most of them are able to pay it back,” she said. “But we always want to decrease debt and put students in a better situation when they go out and get their first job.”

Since UI in the 2012-2013 school year beefed up its financial literacy services and started offering two full-time financial literacy specialists for one-on-one counseling with students, Harrington said, her office has seen thousands. More than 2,000 received individual services in the past school year.

“We would like to see more,” she said, adding that UI has approved additional financial literacy staff because of the need. “But it’s difficult to reach everyone.”

That’s why Harrington said some type of mandatory online module could be “fantastic” as it could — at a minimum — provide students with information about resources available to them.

Although, Harrington said, not every student would take it seriously.

“And unfortunately those are the ones who need it the most,” she said.

Iowa State and UNI also have ramped up efforts to improve student financial literacy. For starters, during orientation at Iowa State — which 98 percent of all new students attend — the Office of Student Financial Aid provides a group session outlining financial aid processes and student loans.

During ISU’s new student acclimation program, called Destination Iowa State, participants attend a “show me the money” session on money management. Officials report more than 78 percent of new freshmen and 25 percent of new transfer students go through the program.

Staff from Iowa State’s Student Loan Education Office throughout the semester facilitate sessions on budgeting, money management and borrowing through orientations with the university’s different colleges. Last year, 74 presentations were given to a total 3,780 students.

In addition, more than 250 new ISU freshmen took advantage of individualized financial counseling, as did 143 sophomores, 142 juniors, 591 seniors and 68 graduate or professional students.

ISU students who become delinquent on their student loans after graduation receive an email and letter encouraging them to re-establish a payment plan. Iowa State’s three-year default rate dropped from 5.1 percent in 2011 to 3.9 percent in 2012.

“Not only does this protect the individual from adverse credit implications, it reduces Iowa State University’s overall default rate,” according to an ISU report prepared for the regents.

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