Students Make Costly Mistakes With Financial Aid
Spending aid money on a car and working too many hours can jeopardize academic success
One woman used her student loan to make a down payment on a car. Another student charged her entire family's new cellphones to her new credit card, at the request of her father. Other students overspent their aid at the beginning of the semester and had to get meals from the local food pantry charity when their college aid dried up by semester's end.
A new study detailing students' financial blunders raises concerns that many undergraduates are jeopardizing their academic success because they haven't first learned how to manage money. The study suggests that for these students to navigate the befuddling financial aid process successfully, they might need to begin with learning financial basics like the difference between needs and wants, the benefits of saving, and the effects of compounding interest.
Susan Eitel, a lecturer in family sciences at Texas Woman's University, says most of the 39 students interviewed at an unnamed public university for her 2007 doctoral dissertation knew they were making unwise and wasteful financial decisions that were harming their educations, but they still did not want to bother learning about finances. Nor were they interested in making short-term sacrifices (such as selling a car or canceling a cellphone) that would raise cash for tuition and give them more free time to study and possibly raise their long-term prospects.
The students, all of whom were dependent on financial aid and were the first in their families to attend college, often focused on their immediate needs and desires, possibly in part because their parents never showed them how to work toward a long-term goal, said Eitel. "They haven't had sound financial behaviors modeled. What they learned were the wrong things," she said.
Eitel found that precious financial aid and paycheck dollars were sometimes diverted from the students' educational needs. One student, for example, spent part of her financial aid on shoes for a sibling. Others worked extra jobs to treat themselves to expensive purses, fancy hairdos, and clubbing sprees.
About half of the students lived on campus and thus could have saved several hundred dollars a month by going without a car. And many spent more than $100 a month on their cellphones. But those expenditures were deemed necessary, Eitel said. Instead, Eitel found the students typically responded to financial stresses by changing other things they felt they could control:
• Working more hours (often cutting into study time)
• Changing majors to something less costly and ambitious. (One student switched from premed to a nursing program because she feared she wouldn't be able to raise enough money to cover medical school.)
• Borrowing more. (They generally took the maximum student loan possible and didn't understand how the bills would hound them after they left school, Eitel said: "The school says, 'I'm going to lend you $5,500,' and they go 'Woo-hoo!' ")
• Scrimping on food.
• Forgoing school supplies such as textbooks.
• Dropping out.
Dropping out, unfortunately, is far too common for low-income students. Research shows fewer than 30 percent of college students from families with incomes below the national median manage to graduate before they are 24 years old. But more than 90 percent of students from families in the top-earning quarter graduate by then and have become qualified for better, higher-paying jobs. The single biggest reason all students give for dropping out: money.
Eitel said helping low-income and financially unsophisticated students won't be easy because of the students' mix of rational and irrational behaviors. How, for example, could advisers persuade students not to spend aid money to help their poverty-stricken families? In addition, Eitel said the students felt justifiably frustrated and helpless when dealing with the mysterious and unrealistic financial aid rules. Some students' parents refused to reveal their earnings and tax information, for example, which makes it nearly impossible to fill out the Free Application for Federal Student Aid and get scholarships or loans. Others called the amount the federal government expected their families to pay for college "crazy" and said they had to take jobs to raise their parents' share.
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Reader Comments
Financial aid
The thing about colleges is that I feel they don't do anything to benefit your needs. I mean as of now I am a freshman at community college. My car broke down, I have twins that are 18 month olds and are not walking as of yet, I have no money, I have no family, I mean no father, no mother, no aunties, no uncles, no grandparents, no cousins, nothing. So because of my car breaking down I talked to people at the college and due to my situation they told me to drop all of my classes because there was no way that I can take my classes online for the rest of the semester. I told them that what the hell do you do to benefit those students who don't have nothing. What do you do to benefit those students who don't have not one single family member to help them out. All they told me was that they can't do anything to help me. I come from a family that is poor and not educated. I am 19 years old. After graduating high school I wanted to attend college so I can start another family legacy. I have a dead father whos been dead every since I was a year old. My mother, every since I was nine years old, is to busy with her own life so I cut her out of my life for good. I have no extended family. I moved out of my moms home when I was 17 years old three days after my twins were born( by the way my twins were premature)and every since then I am struggling to make ends meet. i can't find a job and no one wants to hire me because I am not flexible with my schedule. So back to the subject, I feel that colleges are hear just to take your money out of your pocket. I wanted to go into real estate, but since I have twins, I can't make choices for myself. So I decide to go into nursing. I really don't like it too much. I am bored to death. See students who have money and have family to help them and provide for them can do anything they want to do. But students who are underprivileged have to take on careers they don't even like. I asked some of my fellow students who are all came from the same background as me said they didn't like the program they were in. All they wanted was a career that makes a lot of money. I find that kind of sad and disgusting. I mean these students should be able to feel that they have some freedom to choose. Its just kind of sad that you have to do something you don't want to do. So for all you privileged people out there you are very lucky to habe family and friends because like me I have nobody. Absolutely NOBODY. Thank God everyday for what you have.
It's not such a shock that wealthier kids might have a higher graduation rate. Also, it's not such a shock that people spend insane amounts of money while in school. Geezus, have YOU seen TUITION costs??? It's obscene! Really, these "schools" are stealing money from kids who enter into a four year sentence that rains a severe financial penalty (basically an "edu-mortgage") on their heads. It's a dumb mistake to go to school if you can't afford the "investment". That *means* you can't major in subjects that you might love purely for educational incentive. Better be thinking of engineering, medical, or accounting. Also, don't think you're finished after getting your undergraduate degree. Not in today's world! To be competitive, you have to have at least a Masters degree.
Don't get me started on complaints about the shamefully overpriced textbooks!!!
yet, it is rarely said that college is kind of overrated!
Our American society has been bombarded with standard hype suggesting that college will vastly improve one's life. Americans are led to believe that four years of extra school will some how teach students something invaluable? Well, having graduated from college, I think it was a silly waste of time (grad' with a 3.7gpa with vast selection of coursework ranging from hard sciences to liberal arts)! I gained nothing of educational value for what I paid into it. There's other ways to gain education like by life experience. I think two years immersion in a travel expedition around the world would be a better "investment". Such an nonstandard education would wake up a creative mind. The student gets a real world education that goes beyond the silly cheap lecture delivered by the jaded professor. There's many other routes young people should consider taking instead of college. Too many colleges seem to be fundamentally wrong! They (not all, but most) are lousy institutions with the worst of intentions such as thieving money (got to pay administration and faculty and so and so costs) from naive young students who usually don't know what they want to do with their lives (this is one reason I advise against college as the place to "find yourself"). College is ordinarily too structured, very deadline specific, solidly formal, and just too rigid to allow much education to really happen (but you do learn how to parrot back information beautifully). I think an individual can learn these mentioned "skills" by heading directly into the world of work. Apprenticeships ought to be an alternative to wasting one's time at school. School tends to lean too heavy on standardized theory and crap that does NOT deliver RESULTS in the real world outside academia. My advice? Don't go to college!!!! just because it seems to be preached as *the* next route to take after high school. Do something DIFFERENT from the standard! RESEARCH your chosen school with a fine toothed comb. What's the real monetary value of your educational investment (it's a HUGE financial and time commitment that equates to a gamble really)? Research alternatives to school!!! I just wish people would accept the idea that maybe undergraduate college education is kind of overrated! I can say that even if such a statement devalues my own degree. I think Americans need to stop thinking that a degree means that a person is "educated". For many, real world experience trumps anything one will do in college. I feel like I have to catch up on the four years I wasted.
After saying all of that, I do advocate formal college for the pursuit of hard sciences. But liberal arts, business, and other such pursuits don't require college.
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