Finances and the College Student

1. Finances and the College Student NCASFAA/SCASFAA FALL CONFERENCE November 6-8, 2006 Brad Barnett Senior Associate Director James Madison University Office of Financial Aid & Scholarships Harrisonburg, Virginia

2. Objectives • Learn about the format used in “money management” sessions at JMU • Review strategies to keep the student’s attention • Discuss partnerships that have been created with other campus offices to provide an avenue for reaching students

3. JMU & Financial Aid Office James Madison University • Approximately 16,000 students, of which 15,000 are undergraduates • Primarily 18-22 year olds who graduate high school, enroll full-time in college, and complete college in 4-5 years • Male = 40% & Females = 60% • In-state = 70% & Out-of-state = 30% • Minority = 10%

4. Session Types • Discussion varies depending on audience • Freshmen • Upperclassmen • Will focus on freshmen for the purposes of this presentation

5. Understanding Freshmen • A lot of firsts: • Living without parents • Responsible for finances • Able to make decisions without being “checked on” • Many have never balanced a checkbook • Think about the financial woes of the parents you work with…that’s where your students are coming from

6. Attendance • Voluntary • Mandatory (Partnerships) • IS 202 • Athletic Office • Student Organization • Passport Events

7. Basic Set Up • 1 to 1 ½ hour sessions • Keep class to approximately 20 – 25 students • Focus on Kinesthetic Learning…hands on! • Movable desks • Chalk board or dry erase board • Paper and pencils for students • Avoid PowerPoint whenever possible

8. Beginning Always start by asking, “How many people have created a budget?” Question: Out of 25 students, how many students do you think have created a budget by this point in their lives? Answer: Generally no more than a couple

9. Financial Concerns • Break class into 4 or 5 working groups • Ask them to develop a list of their top five financial concerns, which can be: • Concerns while in college • Concerns for post-college • Have each group report and write on the board

10. Let’s Do It! • Break into groups • Develop a list of the 5 most common financial concerns you think college students have • These can be • Concerns while in college • Concerns for post-college • Paying tuition does not count…that’s a given

11. Income – Let’s Do It! • Develop a list of the 5 most common income sources for college students • Generally receive a lot of duplicate responses from the groups

12. Expenses – Let’s Do It! • Develop a list of the 5 most common expenses for college students • Generally receive a lot of duplicate responses from the groups

13. Congratulations! • You just created the framework for a budget • Goals (concerns) • Income • Expenses • Assign dollar amounts to these items and the budget is created • Goal of exercise is to take the fear out of budgeting

14. Typical JMU Freshmen Responses Concerns: • Food • Housing • Credit cards • Student loans • Insurance • Not running out of money • Saving • Paying tuition (this is a given) • Buying a house • Having a family • Graduate school Income: • Parents (could be monthly or lump sum) • Financial aid (usually disbursed lump sum) • Summer jobs (earned in summer and sitting lump sum in bank) • Gambling (sporadic) • Part time jobs while in school (paid on set schedule) Expenses: • Food (dining out) • Beer • Taxies • Clothes • Hair/Nails • Porn • Entertainment • Cell phones • Dating • Electric • Gas • Rent • Car (gas, insurance, etc)

15. Teaching Note • While groups are working on lists, walk around the room and listen • Interact to develop a rapport • Make mental notes of discussions you hear that you can pull into the instruction • Let the class guide the topics discussed as much as possible to keep their interest

16. Additional Discussion • Use your mental notes to make a connection • Stress difficulty of planning for items in “concern” list if cannot budget • Get a handle on it now before it’s too late • Tell stories of students who got in trouble due to poor budgeting skills • Focus on topics in “concern” list

17. Earnings vs. Spending How much you spend is much more important than how much you earn. This is often referred to as “living within your means.”

18. Credit Cards • Positive • Points • Ease • Help with credit score (side bar about FICO) • Loss (versus cash) • Negative • Easily accumulate debt if do not budget • Ease • Damage credit score

19. Ways to Establish Credit • Credit Card payments • Student Loan payments • On-time payments with all bills, including: • Housing • Utilities • Medical • Financed purchases

20. Establishing Credit cont... • Communication is the key to maintaining a positive credit file and may help to avoid student loan default • Paying bills in a timely manner is important to your future credit needs

21. Credit Card Interest Scenario: • $3,000 charged on a credit card • Interest rate of 19.8% • You pay $50 per month • It will take 24 years to pay off the card • At the end of at time you would have paid back $14,070 ($11,070 in interest) (source: www.visa.com)

22. $3,000 Earning a Rate of 10% Annually (Source: www.americancentury.com)

23. Senior Group Topics • Cost of living comparisons • Insurance (health, life, disability, etc.) • Retirement savings (Roth IRA, 401k, etc.) • Mortgage • Cost of a family • Pay off student loans • Graduate school

24. Conclusion • Don’t lecture • Be hands on • Make it real • Be VERY basic • Teach to your audience • Ask open ended questions • Involve the students • Shock value is good