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Its a future question, not a now question

Proposal for Project Development in Financial Competency for Post-Secondary Students

October 14, 2010

By Jeffrey Black & Jillian Hull

OUTLINEJillian Hull IntroductionStudents financial literacy uneven knowledgeJeffrey Black - IntroductionOur targetJillian Attitudes and BehavioursConsequences of Default Problem Opportunity - Proposal

Jillian HullFaculty member, Douglas College, 1999 - present.

Award-winning instructor - have developed online curriculum and managed several online projects including video-based modules for Online Learning Centre; also developed several student-centred, online projects such as Candid Transitions

Prior to joining the college I was a print and radio journalist. Won numerous national awards for my work. Jillian Hull

At Douglas: Student Success 1100: Introduction to College Studies is one of the few credit courses in B.C. with curriculum devoted to financial competency. We see financial competency as an essential skill for successful educational outcomes, but also an essential skill for the work force. Increasing frustration with being able to reach only a few hundred students per term. On course evaluations, 99% of students rate the credit/debt education portion of the course as Most valuable.

All through high school, we cover material that many of us will never have to use again. But everyone will have to use credit and a lot of us already are -- yet no one knows what it is or how to use it. Cinji, former Douglas College student.

How can we educate post-secondary students to be financially literate on a system-wide basis?

What do students really know about credit and student loans?

It depends if you ask a general question or a specific one...

But to more specific questions...

Lets look at thatEstimated Loan AmountEstimated Loan PaymentActual Loan PaymentDifference$100,000$400-500$1,073$573$50,000$80$356$456$10,000$250-300$107($193)$40,000$100$429$329

Jeffrey Black, BFA, B. Ed., MBABackground in pension and mutual fund investmentFormer partner at Phillips, Hagar & North Investments LtdFormer partner at TAL Investment Management LtdInterest in working to strategically develop educational materials on financial competency for dedicated populations

Through working in investments, I am constantly surprised by how people view money and how they make decisions.

FINANCIAL WELLNESS IS NOT JUST A STUDENT PROBLEMCultural acceptance of spending and debt is increasingDifficulty repaying student loans and consumer debt is increasingAverage Canadian debt at an all-time high at 146% of annual income15% of discretionary spending goes to interest costs on consumer debt--twice what is spent on consumer electronics!

EXAMPLEAdam wants to be a Technical Education teacherTakes $60,000 in in loansWill make $50,000 salary to startMonthly take-home wages $3,000Student loan monthly payment = $644 (21% of take home wages)

Little research has been directed at exploring the impact that student loans may have on individuals financial position after graduation.

May LuongPerspectives on Labour and Income 2010


Some students just dont want to knowThats a later question, not a now question.They think they have no choice but to borrow any amount of money to finance their educationProviders of financial information assume people are logical

Starting with a budgetEighty-one percent of students polled said its important to set a budget to manage finances, but fewer than half of them had actually done so, according to the Leger Marketing survey conducted in September [2010] for Bank of Montreal. The Vancouver Sun, October 6, 2010.

Budget overshoot debt amount

ConsequencesMixed messagesPoor understanding of the short- and long-term consequencesPoor understanding of their choicesBarely thinking about the repercussions of their choices

Consequences default on loan

Interest vs principal

Options if cannot pay loan



Financial planning a low priority to students.


12.5% default rate (nationally)Ostrich phenomenaAn adult issue Family values difficult to overcomeStudents are overwhelmed by the demands of the post-secondary experienceTheir needs are very particular and current models are not able to personalize responses


National entrance and exit surveysTrain the TrainerThe Repayment Assistance PlanNational Task Force on Financial LiteracyPerspectives

THE OPPORTUNITYIf we get students to understand issues and consequences around credit, theyll be more responsible about default.


The Opportunity Why?Broad impactDeliver information in a more interactive way The web allows more individual attention delivered on a mass scale students no longer want to be passive consumers of education

THE SOLUTIONDevelop a system-wideproject.Expand how information is offered: video, problem-based learning, Moodle, etc.Appeal to multiple learning stylesHelp encourage students long-term goal settingBuild in sustained program for students to learn about credit/debt expand on entrance/exit survey.

Financial competency is a now question, not a later question.

Loans affect life choices

STUDENT LOAN AND FINANCIAL AIDProgress made on improving headline default ratesHas been a very benevolent environment


Develop a series of self-assessments and quizzes that can identify the level of financial awareness students have and direct them to information that they still need to learn Embed these assessments and quizzes into the province's financial aid applicationIncrease information about credit, debt, budgeting, and money management as students progress through their programs

GOALSReaching as many students as possibleProviding a relatively simple, cost-effective way to offer financial literacy at a time when this information is likely to have traction with students (at time of loan application)Ensuring that students know enough that they do not inadvertently erect more barriers to their future success. Embedding financial literacy education on a system-wide basis through the Financial Aid application


Student debt is going to increase in an environment of poor job growth and rising interest ratesWith interest rates expected to rise in coming years, the $15-billion in outstanding student debt will become much more expensive for students to service, and for Ottawa to administer, Mr. Usher said. From Ottawa Raises Cap at 11th Hour to Keep Student Loans Flowing, The Globe and Mail, September 5, 2010

Students success at repaying their student loans may have as big an impact on their lives as their formal educational attainment.

Understanding and using credit wisely is an important skill set for adult life.

DEBT PROBLEMSGenerational divide in terms of graduation debt which will dilute economic value of post-secondary attainment. We think students make poor choices about money; while this is sometimes the case, the cost of their education has risen faster than their ability to earn enough money to pay for tuition.Example: In 1978, when I started university, it cost $18 per credit hour and minimum wage was $3.50 an hour.I had to work 100 hours to pay one semester of full-time tuition. Today, for the same full-time tuition at the same institution, using minimum wage as the bench mark, students would have to work 300 hours to pay for tuition. Student loans will, increasingly, be expected to fund the gap.


In 2009 Average Debt Levels University $26,680Average College $13,600


Who gets to see their credit report? Students do not realize who gets to see their credit report: Everyone from future landlords to credit-card companies to creditors Failure to repay student loans can close doors for students who want to continue with their education

Not making a decision still has consequences

Credit score