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Katie Sam UW-Stout Senior CREDIT AND DEBT MANAGEMENT AMONG COLLEGE STUDENTS: PRACTICES AND IMPLICATIONS
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Credit – Ability of a customer to obtain goods and services before payment Debt – State of owing money If you use credit, you accumulate debt CREDIT AND DEBT
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FINANCIAL MARKET IS GROWING IN BOTH SIZE & COMPLEXITY
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Easier for Average American to: Invest in the Market Manage Own Stock/Mutual Fund Investments Set Up Various Savings Tools More Young Adults Have Access to Credit to: Pay for Education Make Ends Meet Make Major Life Purchases OPPORTUNITY FOR GREAT REWARDS
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Benefits: Control Their Finances Achieve Their Dreams Benefit from Investments OPPORTUNITY FOR GREAT REWARDS Dependent on: Their Ability to Make Self- Beneficial Financial Decisions
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Ability to Understand How Money Works: Earn, Manage, Invest, & Donate It Financial Literacy Self-Beneficial Behaviors College Graduates are Financially Literate Only 34% of Americans Graduate Financial Literacy is Declining (Mandell) 1997 2000 2002 2008 57.3% 51.9% 50.2% 48.3% FINANCIAL LITERACY
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US CONSUMER DEBT TRENDS
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US CONSUMER DEBT IS RISING
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FASTEST RISING DEBT IS STUDENT LOAN
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STUDENT LOAN DEBT The 70% of 2012 Graduates with Student Loan Debt Averaged $29,400 (Reed & Cochrane, 2013). (Louis, 2013).
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70% Increase in College Freshman with Cards Median Debt at Every Grade Growing CREDIT CARDS SALLIE MAE, 2009
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Rising Cost of Education 1981: $8,438 2011: $19,339 Difficult to Work Full-Time Debt is not always Bad DEBT MAY BE NECESSARY
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Use Credit to Live Beyond Your Means 40% Respondents Charged Item Knowing They Didn’t have the Money to Pay (Sallie Mae, 2009) Accumulating Debts Aren’t Paid Off Failure to Recognize Costs Associated with Borrowing Money BAD DEBT PRACTICES What Students KnowWhat They Don’t Know Credit LimitLate Fee Payments Current BalanceOverbalance Fees Interest Rates
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STUDENTS AT UW-STOUT
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SENIORS HOLD MORE DEBT/CARDS Total Debt # Cards
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Correct Response Rates What Does a Credit Score Measure?44.64% When Can You Check Your Credit Report? 75.89% Who Has Access To Your Credit Report? 58.93% What are the Three Major Credit Reporting Bureaus? 34.82% Average53.57% FINANCIALLY ILLITERATE STUDENTS
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Pinto & Mansfield, 2006 DOUBLE JEOPARDY : HIGHER OUTSTANDING CREDIT BALANCES ARE ASSOCIATED WITH HIGH STUDENT LOAN DEBT
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DOUBLE JEOPARDY
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Two + Loans Student Loans No Loans What Does a Credit Score Measure? 40%47%45% When Can You Check Your Credit Report? 96%73%76% Who Has Access To Your Credit Report? 80%53%66% What are the Three Major Credit Reporting Bureaus? 67%19%55% Average 71%48%60.5% CREDIT KNOWLEDGE BY LOAN
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13% Believe Debt is not Manageable 12% Admitted Using Cards to Live Above Their Means 20% Admitted to Making a Purchase Knowing They Didn’t Have Money RED FLAGS
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LONG TERM IMPLICATIONS
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HOUSEHOLD UNDER 40 DEBT PEW RESEARCH
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DEBT-TO-INCOME RATIO PEW RESEARCH
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DIFFERENCES IN INCOME AND NET WORTH PEW RESEARCH
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Accumulate More Debt Harder to: Pay off Debt Quickly Save Early for Major Purchases & Retirement Accumulate Assets Impede Ability/Desire to take out Small Business Loans LONG TERM CONSEQUENCES
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THANK YOU
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