Financial Literacy and the Burden of Student Debt
In the midst of analyzing the cost of and funding for higher education, policymakers often forget the practical implications of the decisions they make and the fact that current and potential students have very few standardized methods to get educated on their financial aid options. While there needs to be overwhelming reform in how we fund education in this country, those reforms are not meaningful if they are not communicated. Financial aid is at pitiful levels in our country—as Dr. Goldrick-Rab testified to the Senate committee on education, the Pell covers only about 30% of a student’s education, opposed to 80% in the 1970’s. Clearly there are significant changes that need to be made. However, as those changes begin and continue, communicating the realities of financial aid availability for students is absolutely essential. That communication simply doesn’t exist.
The testimony to the Senate committee on education contains several stories attesting to that lack of consistency in information. Two of the students on the panel, Derrica Donelson and Vivica Brooks, talked about their stories. While both of them were currently able to manage the financial burden of school, it was not always that way. Additionally, much of their financial information came from personal research, and even after putting in time and energy to research their options there was still confusion and uncertainty. There is no centralized location for information on financial aid—pretty much the only hope students have is that their high school advisors or parents will know what to do. There’s also severe issues with the way certain elements of financial aid are determined and communicated. As Baum & Ma discuss, FAFSA does a terrible job of accounting for factors in a student’s life outside of the calculated EFC.
There’s still a ridiculous amount of unmet need—the MDRC report explains that low income/first-Gen students typically see $6,000 of unmet need before loans—but if we’re going to continue telling students to attend school in the meantime, it is the responsibility of the federal and state governments to communicate those gaps to potential students, many of whom have no experience dealing with loans.