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Studies and individual interaction with students shows that most of them don't realize the future impact of debt. |
Features ... While I regularly meet a wide range of students when I'm presenting classes on campus, I can't predict by looking at them who will have problems with their loans and money management. I'm constantly surprised by the relationship some students have with their finances. A few months ago I held an on-campus workshop on budgeting. We also discussed ways to reduce moneyrelated stress. It was a particularly interesting session. The students were very involved and had a lot of great ideas on how to be successful with their finances. After the workshop a woman came up to talk with me. I was dismayed to hear about her financial situation. "I have around $15,000 in credit card debt, that's a lot, right?" she asked. "I pay $225 a month and about $25 goes to principal, but it's worth it. I wouldn't be able to go to school because I wouldn't have a car. I wouldn't have any stuff for my apartment." She went on to tell me how the $225 payment would just be an expense she would always plan for in her budget. After taking a deep-breath, I did a little bit of math for her, "$225 x 12 months x 50 years is $135,000. You're paying a lot more than $15,000." She smiled and said, "It doesn't matter. That's the price I have to pay to get what I want right now. If I can't pay it, I'll just go bankrupt." Is anybody's default warning meter going off right now? "I'll just go bankrupt" is not the best statement for taking ownership of a debt. I asked her what she wanted to do in the future. She had strong ideas about a career, family, a house and money to have fun with. What she was missing, however, was how her present behavior would affect her future. After talking together for awhile about how bankruptcy and defaulting could affect her ability to buy a house, get a job and gain future credit, she agreed that to get what she wanted out of life she would have to be more financially responsible. It surprised me that just by asking questions about her future plans, I was able to lead this student to some understanding of how her current habits could limit her options later. She now seemed clear that being financially responsible would actually help her reach her goals and that paying her bills would be less stressful than not paying them. The question of whether or not she'll follow through remains. It could depend on what additional messages she receives reminding her of our discussion and reinforcing the conclusions we reached. If she keeps her sights on her future, she may be willing to forgo the instant gratification of continuing to shop with her credit cards. What can you learn from this? While you're probably not going to get a lot of appreciation from your students when you talk to them about financial responsibility and loan repayment, it's important to find ways to show how their current habits influence their long-term plans. Whether you do one-on-one counseling, emphasize money management skills in entrance and exit counseling or offer third-party budgeting classes, frequent and repeated reminders of the impact of debt can help your students reach their goals and repay their student loans. |
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