Two months before Joanna Ondusko started her freshman year at Saint Joseph’s College, she knew little about how to take care of her personal finances.
She owned a credit card from Dress Barn, the women’s clothing store, but she didn’t know what an interest rate was.
At one point she forgot she had a $200 outstanding debt on the card.
“I had no idea of how credit cards work,” said Ondusko, an 18-year-old nursing major from Norwich. “I didn’t know anything about them.”
Ondusko isn’t alone.
According to a nationwide survey released in April by the Federal Reserve, high school seniors, on average, were only able to answer correctly about 48.3 percent of basic questions regarding personal finance and economics. That was even lower than the 52.4 percent in the previous survey in 2006.
It’s a troubling statistic for higher education officials, who note that more than 90 percent of college seniors have a credit card, while 60 percent have four credit cards or more.
At the same time, students leave college with an average student loan debt of $25,760, according to Student Monitor, a New Jersey-based research firm.
Defining ‘Interest Rate’
“The financial literacy of most college students is frighteningly low,” said Stephen Seaward, director of career counseling at Saint Joseph’s College. “College students are acquiring a lot of debt in college, but if you ask them to clarify what an interest rate is, they can’t do it.”
To address the alarming trend, Saint Joseph’s has started an aggressive campaign to make incoming students more financially literate.
During the summer, all 227 freshmen entering the school were offered a comprehensive, online course that taught wise spending and credit card use in an interactive game environment.
The program, known as MoneyU, showed students how to manage debt and save money. It also taught them about taxes, insurance, banking, and how credit scores affect their future.
Eighty percent of incoming freshmen took the course. The results were stunning. Post-course scores increased almost 22 percent over pre-course scores, meaning students’ grades improved from a D+ to a B.
Seaward said the school adopted the program because most colleges in Connecticut and across the country haven’t offered students enough guidance on how to deal with high levels of debt.
“Coming to college and being unaware of the impact of your finances can be very dangerous,” Seaward said. “Financial decisions students make today will have a long range impact down the road.”
Parents On The Hook
Excessive financial debt can hurt a student’s academic performance and affect the type of job he or she gets after graduation, Seaward said.
For example, students who need to make large credit card payments may be forced to get part-time jobs, taking away time from the classroom.
And students’ financial problems often spill over to their parents, at least to those who co-sign their children’s loans and become responsible for repayment.
“If we don’t do anything to help students make sound financial decisions, we will all suffer in the end,” Seaward said. “As we are having a federal bailout for the country’s financial institutions, we are going to have a parental bailout for students with their financial debt.”
The school chose MoneyU as its personal finance program because it was designed for digital learners and it integrates video, cartoons, humor, and lots of widgets and simulations to make the content engaging.
Students can move comfortably at their own pace through the 10-hour online course that uses an interactive game environment.
Lessons are short, self-directed and cover 120 different topics, including banking, credit card use, taxes, savings, budgeting and spending.
Students are posed with a different financial scenario and then are asked how they would deal with it.
One question asks: “If you are saving to be a millionaire, which savings will have the most effect on building your total retirement account?”
Possible answers were: saving when you are younger, all savings have the same effect or saving when you are older.
Once a student answers the question, the program gives a detailed explanation.
The program cost the school $2,000.
Now, the college plans to use it again for next year’s incoming freshman class, and it may even make it part of the regular curriculum.
Pre- and post-tests measure the effectiveness of the course, which has had a major impact, Seaward said.
After one student completed it, for example, he opened up an IRA account.
Ondusko, on the other hand, opened a savings account and got a debit card. She said she now pays much closer attention to her monthly bank statements. She also immediately paid off her $200 debt and cancelled her credit card.
“I didn’t feel like I was ready for it,” she said. “The program really opened up my eyes.”
