Thursday, October 2nd 2008
NACADA Annual Conference
Advisors Can Help
Reed Thomas Curtis
University of South Carolina
“Blessed are the young for they shall inherit
the national debt.” –Herbert Hoover
1 The Situation
2 The Students
3 The Support
4 The Strategies
• Recession: A significant decline
in economic activity. In the U.S.,
recession is approximately
defined as two successive
quarters of falling GDP, as judged
by NBER. A recession in one
country may be caused by, or
may itself cause, recession in
another country with which it
trades. (Deardoff, Alan V., 2008)
• Financial Stability: The
avoidance of financial crisis.
(Deardoff, Alan V., 2008)
Economic Crisis of 2008
• Housing Crisis—Subprime mortgages.
• Meltdown of the top Wall Street investment
banker Bear Stearns.
• US Dollar at a record low compared to the Euro.
• Oil Prices Skyrocketing
– Leads to major aviation bankruptcies.
• Global Inflation Crisis
• Increased use of Food stamps, and
Economic Crisis of 2008
• July 2008:
– Mortgage leader Indymac is taken over by federal
• September 2008:
– Lehman Brothers declare Bankruptcy—largest in US
– Federal government bails out AIG and purchases 80% of
– Federal Government takes over mortgage giants Fannie
Mae and Freddie Mac.
– Washington Mutual is bought by JP Morgan Chase.
– “Mother of All Bail-Outs (MOAB)”—Proposed $700
billion rescue package for troubled mortgage purchases.
– Emergency Economic Stabilization Act of 2008 fails
sending wall street on a nose dive, the DOW went down
777.88, the largest drop in US History for a single day.
Rising Tuition and Fees
“During the last decade
tuition and fees alone at
private and public
universities grew by 40
percent and 33 percent,
respectively. By comparison,
the median family income
Private increased by only 12
Universities (Cappannari, 2002)
Universities 1993-2003 Family Income
“Late night pizzas:
$5,200. Books for
Tuition and Fees:
Moving back into
College Student Population
Level of Study Population
64% Graduate with
(King and Bannon, 2002)
Graduating Into Debt
Percent of Students Graduating with
Debt, by Type of Debt
Federal Credit Card PLUS Private Loan
(King and Bannon, 2002)
39% of Graduates with debt
have loans that are
• Their student loan debt exceeds 8 percent
of their pre-tax yearly income. Debt
manageability is an even bigger problem
for African-American and Hispanic
students, who tend to come from lower-
income families and whose expected
annual post-graduation income is below
the national average.
(King and Bannon, 2002)
(King and Bannon, 2002)
College has become a “carnival atmosphere”
where credit card companies view
freshman and others as both "fresh meat”
and potential long term customers
• The majority of students obtain
their first credit card in college,
most in their first semester, and by
graduation over half have multiple
cards (Johnson, 2005).
• Among the many reasons are
heavy solicitation and credit
card access, growing living and
school expenses, lack of financial
literacy etc (Johnson, 2005).
What is the average number of Credit
Card offers a Freshman receives
during their first week of classes?
The Credit Card Nightmare
– The Collection- efforts are often aggressive.
– Stigmatization-embarrassed and lack supportive
source of empathy. (scared to talk to parents)
– The Burden- becomes constant and requires lifestyle
changes. (Johnson, 2005)
• Credit card and other debts can cause emotional problems
and negatively impact their learning abilities in college.
(Roberts and Johnson, 2001)
• A student stressed over credit card debt may suffer
“additional financial, psychological, and physical problems”
Overwhelmed with Debt
Ohio State University Research Challenge Program (Johnson, 2005)
How do they pay?
• Using Credit to Pay-off Credit
– 60% of freshmen and 75% of
upperclassmen have maxed out their
credit cards at least once.
– 60% of freshmen and 2/3rds of
upperclassmen have used one credit card
to pay off another one.
– 73% of freshmen and 67% of
upperclassmen used student loans to pay
off credit card balances.
(Chen and Volpe, 1998)
– The Number of people under the age of
twenty-six who filed for bankruptcy
tripled between 1995-2000
Implications of Bad Credit
•Students with credit card debt-->work more,
study less to repay debt and are not likely to have
best grades-->hurts their ability to secure a well-
paying job upon graduation
•Less than one third of freshmen in OSU Survey
realized that they could be denied a job based on
bad credit report.
•American Dream: students with bad credit after
graduation find a brutal inability to purchase a
home at reasonable interest rate
• Financial instability can increase
stress and lead to depression.
• Some students feel so
overwhelmed and hopeless that
they commit suicide as a result.
– The University of Central Oklahoma
saw two specifically debt-related
suicides within two years.
The Academic Advisor’s Role
• Increase personal financial literacy in order to
empower students to do the same.
• Keep up to date on financial issues that face
– Academic success, health and well-being, and
future quality of life.
• Advocate institutional improvements and responses
to the need for financial literacy amongst students.
• Maintain an open-door policy as students in
financial crisis feel they have no one to turn to.
• Become a legitimate resource repository.
•Encourage academic advising
organizations on campus to offer
professional development opportunities
on the topic.
•Be aware of all available services and
direct students to them
•Warn about the availability of biased and
or false information on the internet.
Higher Education Solutions
•Financial Literacy: Universities must
provide adequate financial education
that is comprehensive and realistic.
•First-year and other transitional
courses should incorporate financial
•Limits on credit card and other debt-
•Offer comprehensive financial
counseling, services, and programs.
•Comprehensive financial education
programming and services.
•University of Virginia
•Offices of Financial Planning
•Texas Tech University
•Bowling Green University
•Comprehensive programs and
resources for students.
•Focus on both health and wealth.
•Monthly finance and health
•Internet quizzes to assess
financial literacy, identity theft
prevention, investment risk
•Strong faculty buy-in: RU-FIT
(Rutgers University Financial
(Rutgers University, 2008)
Provides students, faculty, staff, and
community with information in the
* Establishing credit
* Using credit wisely
* Creating a budget
* Saving money
* Investment education
* Correcting credit report mistakes
* Repaying debt
* Organizing finances
* Tax planning
* Selecting employee benefits
* Expenses during or after college
* Buying a car or home
* Planning premarital finances
(Texas Tech University, 2008)
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Chen, H. and Volpe, R.P, 1998, "An Analysis of Personal Financial Literacy among College Students," Financial
Services Review, Vol. 7, No. 2, pp. 107-128.
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