Crucial Choices:

1
(No Transcript)
2
Crucial Choices How Students Financial
Decisions Affect Their Academic
Success Jacqueline E. King October 31, 2005
3
Beginning Postsecondary Students National
Longitudinal Study

• Produced by the U.S. Department of Education
  National Center for Education Statistics.
• Nationally-representative sample of 9,000 1995-96
  first-time students, followed up in 1998 and
  2001.
• Tracks persistence across institutions.

4
Income Groups Studied
5
Background Characteristics
Low-income Middle- and Upper-income (up to 150
of poverty) (300 of poverty or more)

• 32 of beginning students 41 of beginning
  students
• 53 dependent 90 dependent
• (34 independent w/ dependents)
• 60 female 50 female
• 48 non-white 20 non-white
• 44 age 20 or older 15 age 20 or older
• 35 married and/or w/ kids 7 married and/or
  w/kids

6
Academic Background
Low-income Middle-and Upper-income (up to 150
of poverty) (300 of poverty or more)

• 64 first-generation 33 first-generation
• 13 alternative diploma 3 alternative diploma
• 5 no high school diploma 2 no high school
  diploma
• 56 delayed college entry 23 delayed college
  entry

7
Academic Preparation
8
Institution Choices
9
Financing Choices
10
Attendance Choices
11
Average Unmet Need
12
Employment Choices
13
Choices and Persistence
Middle- and Upper-income (75)
Low-income (63)
14
Work and Borrowing Choices
15
Work and Borrowing Choices
16
Working Penny Wise and Pound Foolish?

• Dick works 25 hours per week, takes 5 years to
  graduate.
• Year 5 Income (25 hrs/week _at_ 7.50 summer work)
  10,800
• Cost of an extra year in college (educational
  expenses only) 5,000
• Net gain 5,800

17
Working Penny Wise and Pound Foolish?

• Jane borrows and works 15 hours per week, takes 4
  years to graduate.
• Year 5 Income as a graduate 30,000
• Total cost of loan
• (borrowed 10k to work 15 hours per week at 7.25
  interest with 10 year repayment) 14,100
• Net gain 15,900

18
Worksheet for Dick
Reflects 25 hours/week for 32 weeks and 40
hours/week for 16 weeks.
19
Worksheet for Jane
Reflects 10 hours/week for 32 week over 4
years. Based on a 7.25 interest rate and
standard 10-year repayment plan.
20
Conclusions

• Full-time attendance and part-time work are the
  surest path to a degree.
• Borrowing can be a productive way to finance
  full-time attendance and part-time work.
• Low-income students who borrow and work part time
  persist at high rates.
• Even middle-income students choose to work and
  avoid student loans.

21
Recommendations

• Integrate academic and financial advising.
• Help students see the long-term academic and
  financial implications of their choices.
• Increase grant funding for low-income
  students--especially who borrow and work.
• Teach students about personal finance.
• There is no one-size-fits-all solution.

22
(No Transcript)