Navigating personal finances is something most people, regardless of age, will struggle with at some point in life. Credit card terms, loan interest rates, hidden fees, savings plans — it can get overwhelming pretty quickly, especially for students planning for or attending college.
It’s Financial Literacy Month, and since student loan debt is one of the most buzzed-about financial topics, I sat down with Eric Carlson, a financial aid counselor at the University of Northern Iowa, who works every day at guiding students through often-complicated financial decisions.
How do you define financial literacy?
To me, it is an umbrella term that encompasses a broad array of financial components, including financial aid. Generally speaking, financial literacy is the level of competency one has when it comes to understanding money and its application in the world.
I gravitate toward this general definition, because often times I work with individuals who have a very thorough understanding of their own income and expenses, but may not know where to start when it comes to understanding financial aid.
What’s the biggest misconception among students when it comes to financial aid?
There seems to be a lot of confusion and incorrect assumptions about what is considered financial aid and the qualifications to receive it. Financial aid includes scholarships, grants, work-study (student employment), and loans.
Also, the importance of completing the Free Application for Federal Student Aid, known as a FASFA, is often unrecognized.
How often should college students complete the FAFSA?
I strongly recommend all students complete a FAFSA each year they attend college if they are interested in any type of federal or non-federal financial aid.
The FAFSA provides students with all federal financial aid for which they may qualify, including grants and loans.
When it comes to non-federal financial aid resources, many programs require applicants to complete a FAFSA to even be considered eligible for award.
Do you feel college-bound students would make different student loan decisions if they were required to attend a financial education course?
Absolutely! Just within the past couple of years, I have noticed an increased interest among students and families regarding financial education, especially as it relates to paying for college.
Many students arrive at college having never researched a loan, and even fewer have had to repay one.
Unfortunately, the concept of loans can seem abstract to students; they already have so many other things vying for their attention while in school, so they don’t really start to grasp the reality of their loans until repayment begins.
I most definitely think that some sort of required pre-college financial education course that included information about debt and repayment would result in more students making realistic, financially-sound decisions.
How do you close these financial literacy gaps for students?
Here at UNI we require every student to meet with our office for what’s referred to as a Private Loan Counseling Session before we disburse funding from private lenders.
During the session, we help students complete a thorough budget based on academic and living expenses specific to them. Then, we determine the recommended amount to borrow, thus eliminating unnecessary loan debt. These sessions have proven to have been immensely helpful for our student borrowers.
Is this approach working for you?
Our efforts are paying off … literally! In recent years, our average student loan debt and default rate has decreased, which has been amazing to see.
We are very much a “pro-counseling” office, and we strive to educate our students on every aspect of financial aid. I think this is a common mindset across all college and universities, so I strongly encourage all students and/or parents to take advantage of their campus resources.
Do you think students prefer face-to-face or online/self-paced financial aid guidance?
Today’s diverse student populations bring unique preferences, so financial aid offices have had to create opportunities to meet each student where he or she is comfortable.
The majority of our communication is done over the phone or in face-to-face meetings. However, if students prefer online interaction, we can offer guidance via email and web. To best meet the needs of all students, financial aid offices must be easily accessible in a variety of ways.
Living on a student budget can be rough. How do you help expose students to healthy financial habits?
At UNI, we have developed a free, non-credit course called Live Like a Student; the premise of which is to teach students to live like a student now, so they don’t have to later.
Topics include budgeting, financial literacy, identity theft protection, and others, all designed to help students achieve financial success.
We also host events throughout the academic year for students, faculty, and staff, all relating to financial literacy and financial success.
How can adults equip students/children with financial know-how?
Lead by example. And start early … the earlier the better!
Parents, teachers, or really any adult having a strong influence in a child’s life, should be intentional and direct about financial education.
I encourage adults to share their financial experiences — good or bad — with children, because when it comes to financial knowledge, every experience has value.
About Eric Carlson
Eric Carlson is a Financial Aid Counselor at the University of Northern Iowa (UNI) in Cedar Falls, Iowa, where he has been with the Office of Financial Aid since 2010. Though familiar with all aspects of postsecondary financial aid, Eric specializes in federal and privately-funded loans and is UNI’s lead counselor for loan repayment, loan forgiveness, and delinquency and default prevention. Each year, Eric counsels hundreds of students and parents, and conducts presentations and events focusing on financial literacy and education.