Online Extra: Personal Finance for Freshmen

College students need money smarts if they want to succeed after graduation. Increasingly, schools are offering assistance

Undergrads who believe GPAs and test scores determine whether they can go to graduate school should consider another number: their credit score. Some law and medical schools encourage -- and a few actually require -- admitted students to submit their credit score to help the school decide if applicants have the means and commitment to complete the degree. Georgetown Law School urges students with severe credit issues to defer for a year while getting their finances in order. "The decisions they make today have a cumulative impact on practicing law," says Ruth Lammert-Reeves, Georgetown's assistant dean for financial aid. According to Reeves, bar examiners in states such as California and New York take an applicant's observance of fiduciary responsibility into consideration. The Medical College of Wisconsin even reserves the right to deny admittance if a student doesn't provide a clean credit report.


  Such actions may seem harsh, but institutions say they want to ensure that financial ignorance doesn't jeopardize a student's graduate education or career aspirations. "I believe we're moving into more of an advocacy role to teach them to be wise and cautious about money issues and spending habits," says Anthony Sozzo, associate dean for student affairs at New York Medical College.

Sozzo, who also teaches a two-hour financial-planning seminar to students each year, says the school "strongly encourages" students to submit a credit check upon acceptance, and 100% comply with the request. A bonus: Some students have discovered credit-report errors or identity-theft issues that they were then able to correct.

Undergraduate institutions are also getting in on the act, helping newly independent 17- and 18-year-old students just beginning to understand this responsibility. "I tell my students, you have to leave Ohio State with two products," says Tally Hart, director of financial aid at Ohio State University. "One is an excellent academic record reflecting the great course work. The second is a great financial record."


  After research showed that students were much more likely to drop out of school because of "outside pressures" -- such as finances and a part-time job -- than poor grades, Hart developed a seven-week "Success Series." Every freshman is required to complete several sessions on such issues as debt management, academic engagement, and leadership, in order to receive credit for a mandatory Survey 100 class. Sessions on savings and investing, credit-card abuse, and identity theft are particularly popular. Freshmen retention has improved each year since the program was founded in 2001, according to Hart.

Students aren't necessarily the only ones that benefit when their financial knowledge is boosted. Chapman University in Orange County, Calif., hired student-coaching company InsideTrack in 2002 and continues to recoup the program's cost, thanks to higher retention rates. Founded in 1999, InsideTrack provides coaches who schedule weekly one-on-one meetings with students to discuss progress in areas like personal finance and academics, recommend useful on-campus resources, and help them cut through administrative red tape. In most cases, the university itself foots the bill.

"I just thought it was exceptional to have somebody in my corner," says 26-year-old Nicole Maral, an undergraduate student at Chapman's Yuba City branch campus. An InsideTrack coach helped her clear up an important financial-aid issue. Maral, who juggles going to school with working and raising a 4-year-old son, found it too time-consuming to handle alone.


  Students who don't face such immediate financial concerns often think financial-literacy courses are unnecessary, but their parents may beg to differ -- even those footing the bill for college. "They really want to know that students learn how to handle life after college as well," says Mahnaz Mahdavi, professor of economics at Smith College. Parents who have made a substantial investment in their children's future realize that a well-educated and financially savvy young person is more likely to thrive in post-graduate life -- and is less likely to require further financial support.

Mahdavi is also director of the Women's Financial Education Program that Smith has offered to its all-female student body since 2001. The impetus for the program was research suggesting that women generally have far less basic financial knowledge than their male counterparts have. She says she made the quartet of voluntary eight-week courses -- which cover entrepreneurship, personal finance, interpreting financial news, and investing -- appealing by offering them on a weekly basis for an hour at lunchtime. Free lunch is even provided.

After taking their final exams, seniors also are encouraged to attend "From Backpack to Briefcase," a three-hour course that covers subjects ranging from types of insurance to retirement plans. Roughly 25% of Smith students choose to participate in these noncredit courses -- a respectable but hardly spectacular turnout.


  Some colleges have found that offering for-credit financial-literacy courses within their curriculums provides students with additional incentives to attend. "Students can fulfill a requirement and get information they can use for the rest of their lives," says Melinda Burke, director of the University of Arizona's Terry J. Lundgren Center for Education and Research, of the school's "Money, Consumers, and the Family" course.

Arizona also offers peer-to-peer financial counseling, an increasingly popular method of reaching out to students, through a student group called Credit-Wise Cats. The Cats are affiliated with Students in Free Enterprise (SIFE), a global nonprofit organization that encourages student-led community outreach on four topics, including personal financial-success skills. Morgan Clevenger, SIFE's financial-literacy program director, feels students may be more comfortable discussing financial issues with SIFE members than with adults. "They're at the same level," says Clevenger of the peer counselors from 96 universities who participate in the program.

While financial-literacy initiatives are becoming increasingly common at U.S. colleges and universities, many schools still simply incorporate financial tips into freshman orientation and leave it at that. Such an approach isn't adequate, believes research consultant Lana Low, who interviewed 125 institutions for a 2004 financial-literacy study done for educational-consulting firm USA Funds. "I think financial literacy should become part of the fabric of an institution," Low says. She points out that financial pressures continue to build throughout students' time at college, as they often accrue more and more debt.

Despite the various approaches schools are taking, the reality is that plenty of undergrads must learn the hard way: Their financial education begins only after having been denied a loan or forced to delay graduate studies.

By Lindsey Gerdes in New York

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