Picture this: Sonya, a low-income student at a California high school, receives an acceptance letter from the University of Hawaii. While the tuition is higher than a public university in California, she decides to go to Hawaii, even though it means that both Sonya — not her real name — and her mother would have to take out loans. After two semesters of lackluster grades, Sonya loses her merit-based aid and has a hold on her student account (also known as a bursar’s account) due to an outstanding balance because of a lack of payment, so her transcript cannot be released to transfer her credits. She is now in debt, out of school and stuck.
With some financial guidance, Sonya could have been facing much better prospects.
There are many reasons low-income students don’t get a degree — on average, just 9 percent of low-income students graduate college by age 24. Many of those reasons are related to finances, including attending a school they can’t afford or needing to take a job to afford college, which can detract from their focus on their studies.
To change this statistic, we need to deploy financial guidance — both leading up to college decisions and once students are on campus. Ideally, students can receive the former type of guidance from college counselors at their high schools and the latter type of guidance from their college financial aid counselors. Unfortunately, heavy caseloads often preclude this type of individualized attention. But community-based organizations can also provide financial guidance to students.
While college counseling is generally used to help high schoolers get into college, financial guidance is a powerful tool to help students choose the right financial fit and stay in college and obtain a degree. Infusing financial literacy into college counselor training will help students make a good financial-fit decision from the get go. College counselors typically receive training about how to create a balanced list of prospective colleges and how to navigate the application process, but not about how to interpret financial aid award letters and help families make a financially sustainable decision.
That’s especially troubling when you consider the fiscal challenges students face. Unlike their more financially stable classmates, low-income students rarely have a safety net. Without parents or guardians to lean on in financially challenging times, one financial obstacle can result in withdrawing from courses or from campus altogether.
Many students have little to no at-home resources to create a plan to finance their education — many of these students not only do not have bank accounts, but also have never paid a bill. Some parents are living check-to-check and don’t know how to use computers, let alone fill out FAFSA forms for federal student aid, interpret financial aid award letters, or make a budget for the one large check that comes from a campus financial aid office.
Financial guidance can support families in developing a holistic plan to meet these challenges and graduate with minimal debt. One of the earliest opportunities to influence financial literacy is the FAFSA application: making sure that students complete it is crucial to their ability to go to college. Helping students complete the College Scholarship Service (CSS) Profile — which is required by many private colleges and universities to determine a student’s eligibility for non-government financial aid, such as the institution’s own grants, loans and scholarships — is another way to assist in financial planning. Completion of these financial aid documents is a first step toward helping students understand the financial burden of college.
Next, financial guidance can help students outline the cost of attendance and see how it varies depending on what aid is awarded. Knowing how to interpret a financial aid package is a fundamental part of making a realistic long-term college decision. Students need to be clear about what part of their package is a loan and what paying that back after graduation will look like. It’s also important to note that financial aid can vary from year to year and students should not take out enormous amounts of debt that they and their families will be burdened with for years to come and may not be able to pay back.
Other key practices include discussing saving money for college early on and setting a budget before arriving on campus. Some students may not know that they need to take bedding and towels to college campuses and that they will have to pay for and do their own laundry.
There’s proof that financial coaching works. At CAP, we support over 500 low-income students throughout their college careers with a combination of academic and social-emotional coaching and financial literacy training. Seventy five percent of our students are on track to graduate within six years. Other community-based organizations in California are providing this type of assistance, but to serve students at scale, more attention needs to be given by both high schools and colleges.
One of the saddest experiences is watching a student leave campus because she or he can simply no longer afford to attend. With the right support, this is a preventable problem. Robust financial guidance can help prepare students to make smart decisions about which college would be a good financial fit, create budgets, manage scholarships and plan for loan repayments. To increase the college graduation rate of low-income students, we must provide financial literacy training — both in high school and in college.
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