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Finances and the College Finances and the College StudentStudent

NCASFAA/SCASFAAFALL

CONFERENCENovember 6-8, 2006

Brad BarnettSenior Associate DirectorJames Madison UniversityOffice of Financial Aid &

ScholarshipsHarrisonburg, Virginia

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ObjectivesObjectives• 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

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JMU & Financial Aid JMU & Financial Aid OfficeOffice

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%

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Session TypesSession Types

• Discussion varies depending on audience– Freshmen– Upperclassmen

• Will focus on freshmen for the purposes of this presentation

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Understanding FreshmenUnderstanding 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

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AttendanceAttendance

• Voluntary• Mandatory

(Partnerships)– IS 202– Athletic Office– Student Organization– Passport Events

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Basic Set UpBasic 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

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BeginningBeginning

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

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Financial ConcernsFinancial 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

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Let’s Do It!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

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Income – Let’s Do It!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

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Expenses – Let’s Do It!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

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Congratulations!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

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Typical JMU Freshmen Typical JMU Freshmen ResponsesResponses

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)

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Teaching NoteTeaching 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

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Additional DiscussionAdditional 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

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Earnings vs. SpendingEarnings 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.”

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Credit CardsCredit 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

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Ways to Establish CreditWays to Establish Credit

• Credit Card payments

• Student Loan payments

• On-time payments with all bills, including:

– Housing

– Utilities

– Medical

– Financed purchases

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Establishing Credit cont...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

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Credit Card InterestCredit 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)

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YearFuture Value

Without Additional Contributions (One-time $3,000 investment)

Future Value With Additional Contributions

(Annually investing $3,000)

1 $3,300 $6,600

2 $3,630 $10,560

3 $3,993 $14,916

4 $4,392 $19,708

5 $4,832 $24,978

10 $7,781 $60,375

15 $12,532 $117,381

20 $20,182 $209,190

30 $52,348 $595,178

40 $135,778 $1,596,333

50 $352,173 $4,193,071

$3,000 Earning a Rate of 10% $3,000 Earning a Rate of 10% AnnuallyAnnually

(Source: www.americancentury.com)(Source: www.americancentury.com)

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Senior Group TopicsSenior 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

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ConclusionConclusion

• 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