For students with modest financial means, the financial education landscape may seem daunting, but they’re in for a treat.
According to a report by the Institute for College Access & Success (IACC), the financial literacy skills of students at some of the nation’s top universities are not only on par with those of the most affluent students, they are actually on par or even better than those of their counterparts in the lower income brackets.
This means that students with very modest financial resources can achieve some of their potential, while students with high financial resources should be prepared to work their way through the financial system, with minimal risk.
“If you can get a few students into the financial-aid process who have a few hundred thousand dollars saved up, they’ll go through the process with a lot less risk,” said Dan Roeske, the director of IACC’s program on financial literacy and financial inclusion.
Roesek added that a recent survey of about 1,500 middle and high school students revealed that students from low-income households were more likely to be in the financial aid pipeline than those from higher-income families.
These students are in for one heck of a ride.
The average age of the students surveyed was 17.6 years, but the average student who was eligible for financial aid was 25 years old, and more than one-third of them had at least one debt.
This is due to the fact that they typically have student loans that average around $40,000, Roeski explained.
These loans can add up quickly and students often need to make payments on them over the course of their careers.
Students with loans are more likely than their peers with less debt to face financial challenges during their careers, especially if they fall into a low-paying occupation.
This can cause a student to miss out on financial support opportunities or have difficulty obtaining loans that they can use to cover expenses during their time off.
Students also often struggle to find affordable housing in their neighborhoods, making it difficult for them to attend school or find jobs that allow them to pay off their loans.
Roseski said the solution is clear: Make sure students are prepared for financial challenges before they ever apply for financial assistance.
“Make sure students understand that financial assistance is available to students with student loans and students with credit cards,” he said.
“This is a good time to educate students about the financial burden that can come with financial aid, so they can understand the risks involved before they apply.”
The IACC survey also revealed that while students from higher income households were twice as likely as those from lower income families to be enrolled in a college-level financial aid program, only 9 percent of them were able to get financial aid.
This discrepancy is likely due to differences in the programs offered to students from different income brackets and, in some cases, students from multiple families.
“The most important thing is to be able to provide students with the tools they need to understand the financial landscape,” said Roeskes.
“Students need to know that their debt can be forgiven and that they will be able use the money they earn to meet basic expenses.”
In addition, it’s important to know when and how to apply for the aid they need.
Students who are underrepresented in the aid pipeline should consider applying for financial-access scholarships to help cover the costs of college, Roseske added.
“I want students to know the financial help that is available, so that they know what they need,” Roeses said.
If you’re looking for a financial-assistance scholarship, contact the National Council of State Financial Aid Directors (NCSEFA) at 1-877-978-8982 or go to ncsefaa.org to apply.
Rueske also encouraged students to consider applying to the Federal Pell Grant Program (FPG), which offers up to $5,000 in financial aid for students in low- to moderate-income categories.
“You should consider taking the Federal Financial Aid Grant, because it will help you pay for your college,” he advised.
“And when you do, make sure you use that money for your living expenses.
It’s really important to pay down your debt.”
For more on the financial crisis, check out this story from CBS News.