NJ loan default rates shed light on student money management skills
From students to professors and administrators alike, most people can relate to the tight hold that increased tuition and overall inflation has on spending.
Last year, that in-state tuition at Rutgers ranked among the highest in the country, while the University’s student loan default rate and the percentage of the school's borrowers who enter repayment on loans during a given fiscal year, were among the lowest at 3.3 percent in 2014, .
Students who defaulted, or failed to repay their loans in 2014 contributed to the national rate of 11.5 percent, according to the U.S. Department of Education. Rutgers offers students resources like personal finance classes and actions from the Office of Financial Aid to help mitigate student default rates and teach responsible spending.
“I think students and families generally have become more knowledgeable after the financial crisis in 2008,” Jean McDonald-Rash, University director of financial aid said. “I think just the cost of education, the responsibility of student loan borrowing has been more public and more visible and I think parents and students generally have taken notice.”
The Office of Financial Aid is required to conduct entrance interviews for students the first time they take out loans and then an exit interview when they are graduating, she said.
Rash said that the office is working on aggregating student loan totals to give students an idea of what a monthly payment look like, rather than just talking about a larger lump sum.
“When you say ‘well you borrow $20,000,’ when you’ve never borrowed before, thinking what does that mean monthly, it’s not easy to do,” she said.
Additional features on the financial aid website include tools and resources about paying back student loans and financial responsibility on campus.
Nicole Chasan, public relations specialist with the Office of Financial Aid, said that the office had the idea to start using blog posts so that students can better understand personal finance. The posts cover a number of topics from spending refund checks, to creating a budget and living off campus.
“So one of our work study students goes out and finds different story ideas,” she said. “And then comes back and she works on it along with another work study student who does all of the design work. They kind of come together to develop an idea of what kind of things students are interested in learning more about financial-wise.”
Refund checks are another area where students can experience difficulty, Rash said. Once the money has been spent there is very little the office can do to help.
“We realize things happen and cars break down and students run into issues that they are not anticipating, but what once that’s spent there’s very little we can do … So we always caution students, if they’re receiving a refund to be careful with that refund and to budget that refund to get them through that term,” she said.
Geoffrey Clarke, a PhD student in the Department of Economics, who teaches an online personal finance course, said that one of the most difficult things for students, or anyone, with personal finance obligations is the emotional underpinning that comes with spending money. The battle between immediate gratification and long-term investment can be difficult for anyone to approach.
Barbara O’Neill, a professor in the Department of Agricultural, Food and Resource Economics, echoed a similar sentiment in regards to digital methods of payment, saying that young adults do not carry around a lot of cash, which could impact how they spend it.
“Young adults are more separated from their money, because if you’re not carrying around a lot of cash and you’re not paying for things in cash, you don’t feel the loss of cash,” she said.
Clarke said that apps which allow people to spend or transfer money quickly can be both good and bad. Certain apps can help you make a budget and spend wisely while others can make it easier to spend without keeping track of what is being spent.
O’Neill also said that in recent years of teaching, she has seen students become more knowledgeable about personal finance, similar to what Rash found earlier. This is largely attributed to a law passed in 2014 that made personal finance a high school graduation requirement in New Jersey.
“Any student that’s just graduating now from Rutgers will have had personal finance in high school,” she said. “Although the quality of courses in high school could vary from school district to school district, but students should have grounding in personal finance just from classes they took in high school.”