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OPINION | The best way to combat student loan debt is by improving financial literacy

Student debt remains one of the most pressing issues among American citizens. Photo by Tamarcus Brown.

By BT Khumbah

If you’re able to read this right now, you’re more than likely literate in the English language. Chances are, if you were given a book or any other form of English writing, you would not only be able to read the text, but to extract meaning from it as well. To be literate is to be knowledgeably versed in a specified area. 

For most undergraduate students, literacy comes at a multitude of levels. Some students have mastered different languages, while others have achieved savviness of technology or music, and the list goes on. However, there is one primary form of literacy that all students will encounter upon adulthood, yet according to a survey from the National Association of Student Financial Aid Administrators, only 33 percent of students can comprehend: financial literacy.

We all need money. We need it for food and we need it for shelter. We need it to obtain our desires, and to sustain our lifestyles. The bottom line is, money is essential in our society. But how does one deal with such influence? How is it possible for someone to satisfy the cravings that might fall outside of their financial reach? These are a few components that comprise financial fluency, and America’s failure to educate its youth on this pertinent subject can potentially alter the attainment of a quality livelihood. 

In April of 2018, Forbes contributor Dani Pascarella unveiled a shortlist of statistics that pinpointed the consequences of financial illiteracy. According to the list, 33 percent of Americans have $0 saved for retirement, 38 percent of households have credit card debt, 43 percent of student loan borrowers are not making payments and 44 percent of Americans have less than $400 cash in the case of an emergency. 

A year later, Pascarella’s counterpart and Forbes colleague, Zach Friedman further expanded on the vitalness of a prominent aspect of her studies. 

Going into college, it’s difficult to have full control over your financial position. With an average price tag between $10,000-$37,000 per year, the cost of higher education has increasingly become a heavier financial commitment. This explains why 44.7 million students borrow a total of 105.5 billion dollars in student loans each year.

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By the end of their undergraduate experience, borrowers have individually accumulated large sums of debt and enter a foreign world of obligations with a vulnerable financial foundation. 

Accompanied by the probable credit card debt, mortgage and auto loans and other expenses that may arise, student loans create monetary turbulence for life post-graduation. Given that borrowers have an 11.4 percent delinquency rate, student loan debt also constrains upward economic mobility. Without the opportunity to freely progress in rank, one can’t effectively contribute to the welfare of the economy. 

Not all college students take out loans. In fact, with new legislative proposals to combat the national problem, a potential future without student debt is achievable. In the buildup for the 2020 presidential election, Senators Elizabeth Warren and Bernie Sanders have openly proposed solutions to the debt crisis during their ongoing campaigns.

Senator Warren plans on implementing an income-based forgiveness plan in which the amount of debt forgiven is dependent on the income of the borrower. With this legislation, three quarters of all borrowers will have their debt completely forgiven, and the national student debt tab will subside substantially. 

On the other hand, Senator Sanders envisions a future with tuition-free colleges and debt-free students. His plan offers to forgive all $1.6 trillion dollars of the national student debt through new tax proposals. Additionally, Sanders suggests repricing public four year institutions to make higher education accessible to everyone. While both plans for alleviating student debt have sparked enthusiastic support from voters, the issue of financial illiteracy remains untouched. Unfortunately, not even Howard University is immune to America’s financial plague. 

At Howard, the financial literacy rate lies at roughly 60 percent. With all financial roads leading to the School of Business, I sat down with Dean Barron Harvey to discuss the urgency of increasing financial literacy on campus.

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“It’s critical,” said Dean Harvey. “We have to fill that void. Your ability to manage your [student] debt requires that you have a certain level of knowledge.” 

There is another person on campus who has also identified this growing issue. Mr. Lincoln G. Brown is the sitting president of the Howard University Employees Federal Credit Union (HUEFCU). He spends the majority of his time in the Center for Academic Excellence, advising students in the College of Arts and Sciences on their academics. 

Similar to Dean Harvey, Mr. Brown expressed genuine signs of concern during our conversation about the current state of financial literacy education. To my surprise, he had already begun the journey to save Howard students from financial crises. He explained how the HUEFCU has recently expanded membership to Howard University students in addition to employees. 

“I’m trying to use the credit union to boost students’ financial literacy,” he explained. 

The responsibility of maintaining a credit union account mimics that of a functional bank account, which most students will eventually acquire. Brown believes developing good financial management habits early will help ease students’ transition into the real world, and will also help them become more creditworthy and prepared for the future.

With Dean Harvey’s progressive mindset and Mr. Brown’s proactivity, the Howard community has hope for an increase in financial literacy on campus. That being said, the national problem of financial illiteracy doesn’t solely fall on the shoulders of the educators. Students’ determination to self-educate is an important aspect on the path to a brighter future, a future in which there will be a stream of young professionals who are fully prepared to enter the economy, and are able to make financially sound decisions.

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