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 32% of beginning students41% of beginning students 53% dependent 90% dependent (34% independent w/ dependents) 60% female50% female 48% non-white20% non-white 44% age 20 or older15% age 20 or older 35% married and/or w/ kids7% married and/or w/kids Low-income Middle- and Upper-income (up to 150% of poverty)(300% of poverty or more)

6. Academic Background 64% first-generation 33% first-generation 13% alternative diploma3% alternative diploma 5% no high school diploma2% no high school diploma 56% delayed college entry23% delayed college entry Low-income Middle-and Upper-income (up to 150% of poverty)(300% of poverty or more)

7. Academic Preparation

8. Institution Choices

9. Financing Choices

10. Attendance Choices

11. Average Unmet Need

12. Employment Choices

13. Choices and Persistence Low-income (63%) Middle- and Upper- income (75%)

14. 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 @ $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.