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Smith Study Sheds Light on College Student Finances

By Kristen Cole

Institutions of higher education need to pay attention to the critical area of teaching financial education, according to Smith College Professor of Economics Mahnaz Mahdavi, whose recent research provided evidence to back that up.

Mahdavi designed a study about student credit card habits last year, in part to determine what else Smith’s Women and Financial Independence (WFI) program should be teaching students to prepare them for making financial decisions now and in the future.

In the national survey of 700 undergraduate, graduate and professional school students, Mahdavi and fellow researchers Jessamyn Lewis, assistant director of WFI, and Howard Gold, associate professor of government, found a surprising trend. Nationwide, about 23 percent of college students—men and women—use credit cards to pay for tuition and fees, and 52 percent charge textbooks and school supplies, which is a greater percentage than use credit cards for dining out.

The findings spurred a Washington Post columnist to challenge other colleges and universities to begin financial education programs like Smith’s. In the August 25 edition of the Washington Post, Michelle Singletary wrote: “The Smith program should be emulated all over the country. And those colleges that don’t have a similar financial literacy program aren’t giving students their money’s worth.”

In fact, more students in the survey had credit card debt than had student loans—65 percent compared to 48 percent. “Students are not just paying for late-night pizza with their credit cards, they are paying for college,” says Mahdavi, whose survey was funded by OppenheimerFunds, Inc., and administered randomly and electronically by InsightExpress. “That can be an expensive way to get an education.”

Mahdavi’s reason for conducting the survey was substantiated by yet another finding: a lack of knowledge about financial matters played a significant role in students’ credit card management.

Fifty-five percent of students said they had never taken a course in personal finance or economics. When they needed information about finances and loans, students turned first to friends and relatives, not to financial professionals or financial aid offices.

Although Smith students cannot amass credit card debt from tuition payments because the college doesn’t accept credit cards, they may still take advantage of the courses WFI offers on credit, debt and budgeting in college and beyond.

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