This document summarizes a presentation given at the 2008 NACADA Annual Conference on how academic advisors can help students dealing with financial instability due to the economic recession. It provides background on the economic crisis, rising tuition and student debt levels, issues with credit card debt, and strategies for advisors and institutions to better support students' financial literacy and stability. Specific programs at universities like Rutgers and Texas Tech aimed at financial counseling and education are highlighted.

1. Session 089 Thursday, October 2nd 2008 NACADA Annual Conference Chicago, IL Economic Recession and Student Financial Instability: How Academic Advisors Can Help Reed Thomas Curtis University of South Carolina curtisrt@gmail.com

2. Presentation Overview “Blessed are the young for they shall inherit the national debt.” –Herbert Hoover 1 The Situation 2 The Students 3 The Support 4 The Strategies Conclusion

3. Terminology Recession: A significant decline in economic activity. In the U.S., recession is approximately defined as two successive quarters of falling GDP, as judged by NBER. A recession in one country may be caused by, or may itself cause, recession in another country with which it trades. (Deardoff, Alan V., 2008) Financial Stability: The avoidance of financial crisis. (Deardoff, Alan V., 2008)

4. Economic Crisis of 2008 Housing Crisis—Subprime mortgages. Meltdown of the top Wall Street investment banker Bear Stearns. US Dollar at a record low compared to the Euro. Oil Prices Skyrocketing Leads to major aviation bankruptcies. Global Inflation Crisis Clothing Food Increased use of Food stamps, and governmental support.

5. Economic Crisis of 2008 July 2008: Mortgage leader Indymac is taken over by federal government. September 2008: Lehman Brothers declare Bankruptcy—largest in US history. Federal government bails out AIG and purchases 80% of stock. Federal Government takes over mortgage giants Fannie Mae and Freddie Mac. Washington Mutual is bought by JP Morgan Chase. “Mother of All Bail-Outs (MOAB)”—Proposed $700 billion rescue package for troubled mortgage purchases. Emergency Economic Stabilization Act of 2008 fails sending wall street on a nose dive, the DOW went down 777.88, the largest drop in US History for a single day.

6. Rising Tuition and Fees “During the last decade tuition and fees alone at private and public universities grew by 40 percent and 33 percent, respectively. By comparison, the median family income increased by only 12 percent.” 40% Private Universities (Cappannari, 2002) 12% 33% Average Family Income Public Universities 1993-2003

7. Student Debt “Late night pizzas: $5,200. Books for class: $7,000. Tuition and Fees: $120,000. Moving back into your parent’s basement: Priceless” (Levine, 2004)

8. College Student Population (NCES, 2005) 64% Graduate with debt. (King and Bannon, 2002)

9. Graduating Into Debt (King and Bannon, 2002)

10. Debt Manageability 39% of Graduates with debt have loans that are Unmanageable. Their student loan debt exceeds 8 percent of their pre-tax yearly income. Debt manageability is an even bigger problem for African-American and Hispanic students, who tend to come from lower-income families and whose expected annual post-graduation income is below the national average. (King and Bannon, 2002)

11. Debt Inequality (King and Bannon, 2002)

12. Credit Cards College has become a “carnival atmosphere” where credit card companies view freshman and others as both "fresh meat” and potential long term customers (Johnson, 2005).

13. Credit Cards The majority of students obtain their first credit card in college, most in their first semester, and by graduation over half have multiple cards (Johnson, 2005). Among the many reasons are heavy solicitation and credit card access, growing living and school expenses, lack of financial literacyetc (Johnson, 2005).

14. Solicitation 8 What is the average number of Credit Card offers a Freshman receives during their first week of classes? (Johnson, 2005)

15. The Nightmare The Credit Card Nightmare The Collection- efforts are often aggressive. Stigmatization-embarrassed and lack supportive source of empathy. (scared to talk to parents) The Burden- becomes constant and requires lifestyle changes. (Johnson, 2005) Credit card and other debts can cause emotional problems and negatively impact their learning abilities in college. (Roberts and Johnson, 2001) A student stressed over credit card debt may suffer “additional financial, psychological, and physical problems” (Norvilitis, 2003) (Johnson, 2005)

16. Overwhelmed with Debt Ohio State University Research Challenge Program (Johnson, 2005)

17. How do they pay? Using Credit to Pay-off Credit 60% of freshmen and 75% of upperclassmen have maxed out their credit cards at least once. 60% of freshmen and 2/3rds of upperclassmen have used one credit card to pay off another one. 73% of freshmen and 67% of upperclassmen used student loans to pay off credit card balances. (Chen and Volpe, 1998) Bankruptcy The Number of people under the age of twenty-six who filed for bankruptcy tripled between 1995-2000 (Johnson, 2005)

19. Students with credit card debt-->work more, study less to repay debt and are not likely to have best grades-->hurts their ability to secure a well-paying job upon graduation

20. Less than one third of freshmen in OSU Survey realized that they could be denied a job based on bad credit report.

21. Future life

22. American Dream: students with bad credit after graduation find a brutal inability to purchase a home at reasonable interest rate (Johnson, 2005)

23. Tragic Responses Financial instability can increase stress and lead to depression. Some students feel so overwhelmed and hopeless that they commit suicide as a result. The University of Central Oklahoma saw two specifically debt-related suicides within two years. (Johnson, 2005)

24. The Academic Advisor’s Role Increase personal financial literacy in order to empower students to do the same. Keep up to date on financial issues that face students. Academic success, health and well-being, and future quality of life. Advocate institutional improvements and responses to the need for financial literacy amongst students. Maintain an open-door policy as students in financial crisis feel they have no one to turn to. Become a legitimate resource repository. (Curtis, 2008)

26. Be aware of all available services and direct students to them

27. Warn about the availability of biased and or false information on the internet.(Curtis, 2008)

29. First-year and other transitional courses should incorporate financial literacy.

30. Limits on credit card and other debt-related solicitation.

31. Offer comprehensive financial counseling, services, and programs.(Curtis, 2008)

33. Rutgers University

34. University of Virginia

35. Offices of Financial Planning

36. Texas Tech University

38. Focus on both health and wealth.

39. Monthly finance and health messages.

40. Internet quizzes to assess financial literacy, identity theft prevention, investment risk tolerance, etc.

41. Strong faculty buy-in: RU-FIT (Rutgers University Financial Independence Training)(Rutgers University, 2008)

42. Texas Tech Provides students, faculty, staff, and community with information in the following areas: * Establishing credit * Using credit wisely * Creating a budget * Saving money * Investment education * Correcting credit report mistakes * Repaying debt * Organizing finances * Tax planning * Selecting employee benefits * Expenses during or after college * Buying a car or home * Planning premarital finances (Texas Tech University, 2008)

43. Questions? Thank You! Email: curtisrt@gmail.com

45. The Burden of Borrowing--State PIRG’s Higher Education Project 2002

46. Graduate Students and Credit Cards, Fall 2006--NellieMae

47. Undergraduate Students and Credit Cards, 2004--Nellie Mae

48. The Project on Student Debt--September 2007

49. Ohio State University Research Challenge Program--2005

50. More Graduates Mired in Debt, Survey Finds—Diana Schemo, NYTimes March 8, 2002

52. Resources Sutton, W. (2002, November 11). Knowing the facts about financial aid: Basic overview of financial aid for academic advisers. The Mentor: An Academic Advising Journal, 4(4). Retrieved November 20, 2007, from http://www.psu.edu/dus/mentor/ Texas Tech University. "Red to Black." Red to Black. 30 Sept. 2008. Texas Tech University. 30 Sept. 2008 <http://www.orgs.ttu.edu/r2b/>. The Project on Student Debt (2007, September). Student debt and the class of 2006. Berkeley, CA: The Project on Student Debt. Retrieved November 20, 2007, from http://projectonstudentdebt.org/files/pub/State_by_State_report_FINAL.pdf United States Department of Education (2006, September). A test of leadership: Charting the future of U.S. higher education. Retrieved November 28, 2007, from http://www.ed.gov/about/bdscomm/list/hiedfuture/reports/final-report.pdf ACE | New ACE Publication Examines How Much Students Borrow to Pay for College. Retrieved October 14, 2007, from http://www.acenet.edu/AM/Template.cfm?Section=Press_Releases2&TEMPLATE=/CM/ContentDisplay.cfm&CONTENTID=10968 ACE: Federal Student Loan Debt: 1993-2004. Retrieved October 14, 2007, from http://www.acenet.edu/AM/Template.cfm?Section=CPA&Template=/CM/ContentDisplay.cfm&ContentID=10733