Universities Intensify Financial Literacy Focus Sparking Change in Student Loans

With student debt skyrocketing to more than $1.2 trillion, the financial education industry continues its calls for a greater focus on financial literacy to prevent the debt crisis from further impacting the already distressed economy, not to mention the lives of individuals and families struggling to manage their debt. In both developed and developing countries, students are finding it increasingly difficult to meet loan payments, including those with relatively high paying jobs.

In response to this fast-growing crisis, many universities have stepped up with an expansive range of solutions intended to assist individuals in better understanding and managing student debt. In one of the latest moves by institutions of higher education, Purdue University has put in place a process to freeze tuition rate increases during recent years, while several other colleges and universities are rolling out discounted summer tuition plans in an effort to facilitate student efforts to graduate more quickly, thereby avoiding the need to incur more debt.

Financial literacy proponents also are pointing to new data showing a clear impact of university efforts to develop and launch solutions in the area of student loans. One example includes recent initiatives by Indiana University, which has engaged in a broad financial education program at all of its campuses to advise students, prior to making their loan decisions, regarding the amounts of their potential monthly loan payments following graduation. The results of these efforts include an 11% decline in federal undergraduate Stafford loan disbursements at Indiana University in the nine months ended March 31, 2014, as compared to the same period in the prior year.

Data is reflecting similar results on other campuses as well. Undergraduate federal borrowing dropped at Purdue University by 12% during the past three quarters following its launch of financial education initiatives designed to assist students in better understanding the financial and other effects of student loans.

As the student debt crisis continues to mushroom to unprecedented levels, and as calls have escalated for colleges and universities to take a more active role in addressing this economic and personal finance calamity, data pointing to the success of financial literacy programs in this area is invigorating. To the extent more institutions of higher education join the movement to help solve the student debt problem, the financial literacy, money management capabilities, and personal finance success of college students and graduates should continue to strengthen in the months and years ahead.