College students struggle with financial literacy, study suggests

College students slammed with credit card debt must learn how to properly deal with their finances before debts and poor financial habits begin affecting their futures, according to a study released Wednesday.

“The banks recognize that there is a freshman clientele on campus,” said Daryl Graves, a College of Arts and Sciences undergraduate academic administrator. “Basically they’re encouraging kids to use their credit cards, and every month they just pay their minimum fee, which doesn’t cover interest. Kids have to be careful how they manage their financial decisions.”

Graves said he does not believe student debt accumulation is inescapable and freshmen need a “refresher” on responsibility when without supervision for the first time, especially on an urban campus.

The study, conducted by EverFi and sponsored by Higher One, focused on student behavior in banking, saving, credit cards and school loans. The findings are based on a survey of 40,000 students attending four-year public and private universities in 43 states.

Twenty-eight percent of first-year students had a credit card and 25 percent had more than one, according to the study. Of the students with at least one credit card, 35 percent make only the minimum payment on their credit card and 8 percent of students have been late on a payment in the last year.

“This report sounds the alarm that institutions must augment current financial literacy education,” said Director of Financial Literacy and Student Aid Policy at Higher One Mary Johnson in a Wednesday press release. “We need to ensure students entering college are given the right financial literacy education, tools and support to make sound financial decisions while in college and beyond.”

Bruce Watson, a professor of economics, said students are in similar financial situations to adults, but have less experience in dealing with financial burdens.

“There’s nothing unique about students — a lot of people have trouble managing their credit card debt,” Watson said. “In a student’s case, they often don’t have a lot of experience handling credit card debt, and they don’t realize immediately that it has to be paid for at some point.”

While 79 percent of students surveyed responded they worry about debt, 30 percent responded they feel it is better to buy something and pay it off later, according to the study. About 40 percent of students surveyed believe student debt is inevitable.

Eighty-six percent of those surveyed had a checking account and were found to act more responsibly, according to the study. These students more often reported buying only what they needed, setting a budget, paying credit card bills on time and paying student loans on time.

Several BU students said they make efforts to ensure they are on stable financial footing.

Gabrielle Newton, a College of Communication junior, said she would use a financial literacy resource if BU offered one. However, she said she did not struggle adjusting to dealing with her own finances her freshman year.

“For the most part, freshman year was good for me financially,” she said. “It’s easier when you live on campus and you have a meal plan and convenience points.”

Alison Ishii, a School of Management freshman, said if BU offered classes to help students organize their finances, she would take it.

“I didn’t really have trouble adjusting to using my own money here,” Ishii said. “I just had to watch my money more carefully than I did before.”

CAS freshman Bianca Ruelas said she has been in charge of her finances for a long time and has learned how to deal with banks.

She said she is financially sound because she does not have a credit card.

“I can only spend money that I actually have,” Ruelas said. “It’s hard being in a new city with so many new experiences andhaving to use my own money for it.”