Financial literacy is a crucial aspect of life that can make a significant difference in the financial well-being of students.

Unfortunately, the financial wellness of students isn’t even across the board, and students of color typically lack financial literacy skills and resources, which can lead to financial instability and debt later in life.

The Next Gen Personal Finance report on the 2019-20 school year revealed that only 3.9% of students from low-income schools were required to take a personal finance semester to graduate.1 

Research also shows that students of color have lower financial literacy scores than their white peers. A report from the American Economic Association found that financial literacy scores for minorities were actually 9-16 percentage points lower.2

This financial wellness gap is a result of various social, historical, political, and institutional factors.3

Colleges and universities have a responsibility to address the factors that they can control, to help improve the financial wellness of students of color.

Racial Wealth Barriers

One of the main reasons why financial literacy matters for students of color is that they often face more financial barriers than their white peers. The median wealth of white families is 10 times higher than that of black families, according to the Federal Reserve.4

This means that students of color often lack the resources, support, and knowledge that their white peers have when it comes to learning about financial literacy.

There are many reasons why students of color are especially at risk when it comes to financial success.

  • Lack of resources: Students of color may not have access to the same financial resources and support systems as white students. This can make it difficult for them to gain the knowledge and skills they need to make sound financial decisions. A lack of access to family wealth or networks of professionals who can help guide them in their financial decisions makes their journey much more difficult.
  • Discrimination: These disparities in wealth are often a result of factors such as discrimination in the housing market, the criminal justice system, and the job market. This lead to lower income and fewer opportunities for financial stability for communities of color.5
  • Student loan debt: Another reason why financial literacy matters for students of color is that they are more likely to be burdened with student loan debt. According to a report from the Institute for College Access and Success, students of color are more likely to take out student loans and have higher loan balances than white students.6 This can have a significant impact on their financial well-being after graduation, as they may have a harder time paying off their loans and may have less money to invest in other areas of their lives.
  • First-generation students: Students of color are more likely to be the first in their families to attend college, which means that their families may not have the expertise to teach them about financial literacy, or how to properly manage their finances throughout school. 

This wealth gap has a significant impact on the financial well-being of students of color, as they may have a harder time affording college and may have less money to invest in other areas of their lives. 

It is important for colleges and universities to recognize and address these racial wealth barriers in order to provide students of color with the resources and support they need to become financially literate and achieve financial stability.

How You Can Help 

As financial aid directors, it is important to recognize the unique financial challenges that students of color face and to provide them with the resources and support they need to become financially literate. 

There are many tools, strategies, and resources we can use to improve student success. 

Financial literacy workshops

Financial literacy workshops can provide students with the knowledge and skills they need to make sound financial decisions. These workshops can cover topics such as budgeting, saving, investing, and managing debt.

Mentoring programs

Mentoring programs can provide students with access to professionals who can offer guidance and support as they navigate financial decisions. This can include connecting students with financial advisors, bankers, or other experts in the field.

Scholarship and grant opportunities

Providing extra opportunities for students of color to receive grants and scholarships, can help to alleviate the financial burden that they face. This will help provide them with the resources they need to afford college and achieve financial stability.

Specialized financial aid packages

Financial aid packages should take into account the specific financial needs of students of color, such as their higher likelihood of having student loan debt. These packages can include additional support and resources to help them pay off their loans and achieve financial stability.

Financial counseling and coaching 

Financial counseling and coaching can provide students with the support they need to create a financial plan that works for them. These services can help students to create a budget, reduce debt, and improve their credit scores.

Additionally, it is important for the financial aid office to be culturally responsive, for example, understanding the specific needs of the student population, and partnering with community organizations.

By providing students of color with these resources and support, financial aid directors can play a key role in helping them to achieve financial stability and success. 

Financial Literacy with iGrad

Financial literacy programs can have a huge impact on students of color, who may not have the same access to financial education and support systems as their peers. 

By providing these students with the knowledge and skills they need to make smart financial decisions we can help them feel more in control of their finances.

iGrad Financial Wellness is a comprehensive financial literacy platform that can help institutions to provide students of color with the resources and support they need to succeed. 

The platform offers a range of financial literacy programs that can be tailored specifically to the needs of students of color and includes financial coaching, scholarship search and application assistance, and financial tracking and reporting tools.

It is worth noting that many colleges and universities have already worked with iGrad, and have already seen the impact their financial literacy initiatives are having on their students. 

 

 

1 - https://www.ngpf.org/state-of-fin-ed-reports/

2 - https://www.aeaweb.org/conference/2019/preliminary/paper/3ihGHf9h

3 - https://www.mckinsey.com/industries/public-and-social-sector/our-insights/the-economic-impact-of-closing-the-racial-wealth-gap 

4 - https://www.brookings.edu/blog/up-front/2020/02/27/examining-the-black-white-wealth-gap/

5 - https://www.pewresearch.org/social-trends/2016/06/27/3-discrimination-and-racial-inequality/ 

6 - https://www.brookings.edu/research/black-white-disparity-in-student-loan-debt-more-than-triples-after-graduation/