Did you know that not offering a financial education course to your incoming freshmen can have an extreme negative impact on your campus?
Financial concerns are the number-one reason why students drop out of college today. In fact, according to the National Center for Education Statistics, the attrition rate between first- and second-year college students is 24.5%. That means nearly a quarter of all freshmen do not return their sophomore year! To make matters worse, another study found that 42% of those who leave do so because of financial reasons.
In 2009, Sallie Mae discovered that 84% of college students indicated they needed more money management education. In addition to that, a 2009 Noel Levitz report concluded that only 46.4% of college students claimed that they had adequate financial resources to finish college. Keeping those percentages in mind, wouldn’t it make sense to offer incoming freshmen a financial education course? Not only would the class help students, but it would benefit your college as well by decreasing the attrition rate!
Let’s use these stats in an illustration to gain a better understanding of the problem. Example University has 1,000 incoming freshmen who each pay in-state tuition. The current national average for in-state tuition is more than $6,300.
1,000 x 24.5% = 245 students lost in attrition.
245 x 42% = 102 students lost due to financial concerns.
102 students x 6,300 = $642,600 x 3 years = $1.9 million in lost tuition.
See how losing just over 100 students because of financial issues can literally cost the school nearly $2 million in lost revenue?
That’s a recurring loss for every freshman class. Jim King, Vice President of Dave Ramsey’s school curriculum, said, “This is a major problem. Not only does your college miss out on tuition dollars and alumni giving, the students who leave for financial reasons miss out on an opportunity to shape their futures for the better.”
So can the time and cash spent on teaching college students how to handle their money really pay off? Absolutely!
Let’s say Example University spends $20 per freshman to equip them with money management skills. That’s a $20,000 up-front investment on the college’s end. If they retain only two of the potential 102 students who drop out due to financial issues, they will have more than recouped the cost of the program!
This simple example doesn’t even factor in other tangible ways financial literacy will impact the college. Think about alumni support and community involvement. “Allocating time and resources to teaching students about money is an investment that will keep giving back for generations,” Jim said.
It only makes sense for colleges to start implementing money management courses in their general education requirements for freshmen. With such a small initial investment by the college, a financial education course can reap dividends for both the school and the student.
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