30 minutes is not enough: The need for increased transparency and greater financial literacy

It is widely accepted that the bootstraps narrative so often invoked in political grandstanding and on Facebook lacks the multicultural competency, historical or socioeconomic context to be as applicable as the Horatio Alger fairy tale stories from whence it came. Even though the bootstraps axiom is known to be flawed, it still somehow persists through a larger cultural narrative. Though imperfect, modern bootstraps lead to higher education for those able and privileged enough to have the opportunity.

This in itself is not surprising. There is little doubt that higher education is the most reliable way for an individual to elevate their personal socio-economic status, though equity of opportunity is demonstrably lacking due to significant systematic barriers and inequities. Regardless, the imperative is demonstrated in the research, with the Bureau of Labor Statistics, asserting the chances of an individual achieving positive occupational and socio-economic outcome are drastically diminished without higher education. Though illusive, and largely reserved for privileged elite, the modern American Dream is an economic one built on higher education.

The professional and economic imperatives for individuals to pursue higher education are clear. What is also clear is that the costs of higher education have risen faster than almost any other commodity since 1985, with, “college education inflation rate has risen nearly 500%.” Remarkably, though often maligned in the media and by consumers, every year in record numbers, students and families show up in droves. Accompanying the increase in costs has been an astronomical growth in student loan debt, with the average graduate in the class of 2016 holding $37,172.00. Nationally there are over 44 million individuals with student loans totaling over 1.3 trillion dollars in debt, and an awe inspiring 11% delinquency rate among active borrowers and nearly 5 million individuals en route to default.

How did we get to this point? A broader social and economic culture forcing students to pursue an endlessly expensive experience, and all they need to do is a brief online course that last 30 minutes? That is it. On the Student Loan Entrance Counseling web portal in a mere “20-30 minutes” students can watch a video, take a course, and in less time than an episode of Friends, they’re in, and quite often, for longer than they realize. There are myriad ways to unpack the monumental challenges presented within the student loan debt crisis currently facing higher education and they hold significant economic and ethical implications. What I find particularly challenging is the disproportionately high risk that low income and first generation college students, often from modest economic means and holding marginalized identities, take when they pursue higher education. To finance the dream, students who receive Pell Grants borrow at increased levels just for a chance to attend, thus financially overextending students lacking the familial financial capital to support them should they fall.  “Graduates who received Pell Grants were likely to borrow, and borrow more: 88 percent of graduates who received Pell Grants had student loans in 2012.” Complementing disproportionately high borrowing loads on more marginalized groups, there is a larger issue of financial illiteracy impacting students across the board in higher education. According to the Brookings Institute, in 2016 “Borrowers who are not aware they have any federal debt are surprisingly common. … Twenty-eight percent of first-year college students with federal debt reported that they did not have any federal debt, ” sentiments echoed by Bloomberg in another study found that talking to students at, “three Bay Area campuses, …just 6 percent of them knew how long they would be repaying the debt. Only 8 percent knew the interest rate,” ; an alarming lack of financial literacy.

As higher education professionals there is a moral and ethical challenge that needs to be addressed, and often with students, it’s the $37,000.00 elephant in the room. Financial literacy is lacking and as advisers we need to find ways to more adequately prepare the students we serve for the financial realities of the decisions they’re making, even if it could potentially hurt the bottom line with an inconvenient truth. Truly, more than ever, successful attainment of higher education is a necessity for any individual looking to punch their ticket to the middle class, but the risks are real and it is the duty of the academy to make sure there is transparency and justice in the process.

Liam Danaher

(He, Him, His )

UVM HESA, 2018

Saint Michael’s College, 2009

 

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