STUDENTS at the University take physical fitness seriously. We have several gyms, dozens of club sports and thousands of well-conditioned athletes. Unfortunately, we don't take fiscal fitness quite as seriously. Like thousands of other college students, many of us are drowning in student loan and credit card debt. The University must help students avoid debt traps by requiring personal finance seminars as part of summer orientation.
Excessive debt affects students from all backgrounds and areas of study. According to the University's Web site, the average student loan-related indebtedness of a 2006-07 in-state graduate was $16,727. Out-of-state graduates owed $21,320 on average. These figures exclude loans taken out by parents. With over 30 percent of students in the class of 2007 receiving some type of loan, debt was a serious issue for nearly 1,000 graduating Wahoos last year.
The difficulties such students face are illustrated by a first-year in-state male who supposedly benefits from the AccessUVa program, and wished to remain anonymous for this column. Upon enrolling at the University he was greeted with $2,601 in loans for the fall semester. At this rate he will graduate with over $20,000 in student loans. A Perkins Loan contributes $1,750 of his yearly total, leaving $3,452 as an "unsubsidized loan."
This student, who plans to attend medical school, believes his loan burden will significantly influence future education and career decisions. He hopes "to begin chipping away at my debt by the time I'm 30 and done with my residency." His giving to the University as an alumnus is also in question. He predicts that "If I had enough money I would set up my own scholarship instead of just giving to the University."
Most concerning for this student and thousands of others like him, these figures reflect only student loan debt. According to a 2004 study by the student loan provider Nellie Mae, the average college freshman has $1,585 in credit card debt. This debt burden nearly doubles during college, so that by graduation an average student owes $2,864.
The outlook for graduate students is even more dismal, as a 2007 Nellie Mae report finds that the mean outstanding balance for a credit card-wielding TA is $8,612. Ironically, business students had the highest average debt with nearly $14,000 owed. They are also the oldest students on average, so they've had more time to amass such debt. Nonetheless, lessons learned in accounting and finance courses apparently don't carry over into one's personal life.
Many adults attribute such indebtedness to laziness or immaturity. However, college students show no more indiscretion with their money than the nation overall. According to bankrate.com, the average American household had nearly $14,500 in debt in 2004. Average debt burdens have increased since 2004, as data from the Bureau of Economic Analysis shows that Americans' personal savings rate hasn't eclipsed one percent since the last quarter of 2004.
Student debt is arguably more serious than household debt. Debt forces many students to take the most lucrative job they can find rather than pursue graduate studies, travel for a year after graduation or perform nonprofit or philanthropic work. According to a report by the National Bureau of Economic Research that was cited in a Chronicle of Higher Education article, "an additional $10,000 in student debt reduces the likelihood that a graduate will take a job in a nonprofit organization, government, or an education field by five to six percentage points." As a result, fewer University students commit to multi-year programs like Teach for America or the Peace Corps because they have crushing debt burdens that demand immediate payment.
With such serious financial issues facing thousands of its students, the University must do more to address student debt. Only one personal finance course is offered on Grounds, and its enrollment this semester is limited to 70 people. Not surprisingly, the course has a wait-list.
In fairness, at least one feeble effort has been made to warn students of debt burdens. Seminars like "The Heads and Tales of Money Management" are offered to first-year students. However, these are voluntary events that likely don't reach the people that most need them. The Cavalier Daily, which is not supported by University funds, is trying to raise awareness about personal finance through a new weekly section on the subject. Yet not every student will be exposed to this information either.
The only way to teach personal finance to every student is through summer orientation for incoming first-year students. The University must provide an inaugural personal finance seminar for students of the class of 2012 and their parents. Students would benefit from frank information and warnings against loose spending. Considering the average American household debt, most parents could also use a refresher course on budgeting.
The University cannot bank on students individually learning personal finance, but instead must work to improve our quality of life and reduce money-related stress by directly addressing debt burdens. If these reasons aren't sufficiently compelling, perhaps University administrators will be persuaded by considering the giving potential of thousands of heavily indebted alumni.
James Rogers is a Cavalier Daily associate editor. He can be reached at jrogers@cavalierdaily.com.