Tell them, Congratulations on all that hard work in high school— now it’s time to map out the rest of your life. You may not know exactly what you want to do right now. That’s ok, that’s normal— but we’re going to need you to narrow it down to one or two things that you would be comfortable borrowing $100K+ to learn more about. Anything sticking out?
Kids who know nothing about finance are told that they need to make what will usually be the second largest financial decision of their life— the first typically being the purchase of a home. It’s not sustainable. It’s not sensible.
In this article, we take a look at how to better educate high school students about finance before they take out student loans.
To be clear, the issue goes beyond loans. The average high school student graduates without even knowing how to make a budget. That’s a big deal because once a kid hits eighteen, they are technically, and in many cases, actually, financially responsible for themselves.
Unfortunately, this means that many kids are learning about personal finance not in the controlled conditions of a classroom, but out in the real world, where mistakes get paid for with (very, very literal) interest.
There has to be a better way!
Ah, but there is. Regular financial instruction can be an easy way to help kids better understand their loan choices, and also just leave high school with the skills and understanding needed to make sensible financial choices.
Below, we will take a clearer look a what that looks like.
Regular Instruction Starts Early
First, let’s consider the word, “Regular.” While personal finance is important, it’s also not necessarily something that educators need to build their curriculum around. There are currently several life skills that find their way into classrooms without dominating them.
For example, reproductive health. Without wading into the larger conversation of how well sexual health is addressed and explained in the classroom setting, it is a fact that most schools provide their students with units on it.
These classes may include everything from disease prevention to proper contraceptive implementation. Graduates of these classes may not leave school with enough knowledge to open and run their own clinic, but they receive at least enough information to know how to keep themselves safe.
Personal finance could be considered in much the same way. Regular but brief units on how to set a budget and make sensible borrowing choices could be an effective way to help kids understand what they are getting themselves into when they borrow money.
Cover the basics. Interest. Repayment schedules. Alternative options. ROI.
Return on investment. Because that is ultimately what a college degree is. It costs a lot of money to get a degree, but you do it with the expectation that said money will buy you the future you are hoping for.
Unfortunately, this basic fact sometimes gets obscured by the mythology surrounding college. Kids go in thinking of it as their first taste of independence. An opportunity to branch out and try new things. To interact with new people and challenging ideas.
While these factors are rewarding aspects of the college experience, they are plainly not the reason it exists. You can expand your horizons with a library card for no money at all.
When kids are taught to look at college as an investment, it can help clarify their decision-making. They may like this school, but they will get the same benefits from School X, where a scholarship will allow them to borrow $15K less.
Is it ok to still choose the first, more expensive school? For many kids, the answer might be yes. College is still an experience and financial instruction shouldn’t completely erase that. However, a little bit of knowledge and understanding can help ground that experience in the greater context of the student’s life outside of school.
Looking at college from its ROI potential can also help students—
Choose a Degree
We mentioned earlier the horizon-expanding potential of a library card. It is, admittedly, a crass and perhaps even reductive reaction to what college is. Many college graduates reading this article may recall with vivid clarity the class or professor who changed their entire perspective over a few months.
That is a valid and in fact common college experience— one that is difficult to reduce to dollars and cents.
The focus of this article is not to say that everyone should major in engineering (currently the highest-paying college major). It is to suggest that kids should be encouraged to think about how the things they study will eventually help them pay off the very expensive loans they have just taken up.
If the kid can figure out how to make a creative writing degree work for them, great. If not, maybe they might be better advised to pursue writing extracurriculars, or in the form of electives, while zeroing in on a major with a more tangible ROI.
Navigating college is a tough nut to crack. If you could reduce the experience down to one word, “potential,” might adequately suffice. Universities are where kids go to learn more about what they want and who they are.
There’s an exciting and whimsical quality to this prospect that shouldn’t be completely absent from the conversation. Psychological and emotional factors that contribute to how kids experience their education.
Unfortunately, when the average student leaves college with around $40K in debt, other considerations need to be applied as well.
It is possible to think practically about college, and still enjoy the experience. Kids who have received financial instruction in high school are better positioned to view higher education choices through a practical lens.