(Rock Hill, S.C.) — Student loan debt, at about $1.5 trillion, is now the second-largest debt market in the U.S. behind home mortgages, with the average student carrying more than $33,000 in student loans upon graduation.
Additionally, a national survey of more than 18,000 undergraduate students at 52 colleges and universities, conducted by Ohio State University, found 70 percent reported feeling stressed about their personal finances.
Earlier this year, the U.S. Financial Literacy and Education Commission, part of the U.S. Department of Treasury, issued a report that recommended that colleges and universities start to require financial literacy courses.
Dr. Jimmy Cheng, an assistant professor of finance at Winthrop University who who specializes in financial planning, was a guest on the Palmetto Report to discuss the struggles students face managing money.
“In a traditional college environment, they are kids right, so they learn, because they don’t know anything about (financial literacy),” said Cheng.
He said students are just learning to handle their own lives and become independent, so they have a lot of things to deal with financially, because they don’t have a lot of resources.
“Even when you have part-time job and you don’t get paid enough to be in a position that you cannot worry about tomorrows expenses,” said Cheng. “If you need to worry about next month, especially as a nontraditional student, if you have a lot of stress about where you get the money for your next dinner, that is bad for your brain.”
Cheng said being financially stable means you have enough resources or income and being financially literate means you know how to handle those resources.
“Finance is a technical area,” said Cheng. “Let’s say if your area of study is not really technical, it might be harder for you to grab the technical concept.”
Students often run into trouble using credit cards. For example, a U.S News survey found 40 percent of students are not taught about credit cards before acquiring one.
Additionally, a Consumer Affairs survey found that 10 percent of college students mistakenly believe credit cards are “free money,” because the charges don’t have to be repaid.
“The only reason why students are so targeted by those (credit card) companies is because they know nothing and if you give them a free t-shirt, they will sign up for a credit card,” said Cheng.
Cheng said it’s difficult for the students to pay off credit card debt in full, because they do not have a lot of money and the companies often charges high interest rates.
He said he tells his students to pay attention to every dollar they spend and to use software to help keep track of where their money is going.