University Graduates

“Upon entering the real world post-grad, I realized everyone around me, myself included, was financially planning for the present and not the future,”  said Jack Goldman, a 2023 graduate from the University of Southern California.

Financial Literacy Rates In America

Despite going to a private, college preparatory school for high school, followed by a private university, Goldman was never exposed to the crucial lessons of personal finance. This is a fact that rings true for millions of Americans. In fact, there is a financial literacy crisis in America. According to the Ramsey Report from December 2023, 88% of adults say they left high school not being prepared to handle money in the real world. Additionally, a 2022 FINRA study found financial capability, stability, and confidence aren’t improving. Financial literacy is an issue across America, impacting people of all ages and backgrounds, that comes with a simple solution — improving education.

While there are many different levels of intricacy when it comes to financial literacy, there are some agreed upon basics that can significantly improve the financial well-being of millions of Americans if taught in schools. These include basics savings, emergency funds, credit scores/credit cards, loans, debt, and investing.

The pandemic revealed glaring financial issues across the United States, including income inequality, inflation, and student loan payments. As a result, certain states are beginning to require financial literacy classes in high school. These courses cover topics such as budgeting, saving, and managing debt. However, across the United States, just seven states (Alabama, Iowa, Mississippi, Missouri, Tennessee, Utah and Virginia) require students to take a semester-long personal finance course. The level of education on financial literacy varies by state, city, and county, and in many states under 10% of students are required to take a personal finance course.

While the conversation of what should be taught in the classroom can often be divisive across states, political parties, and religious groups, there appears to be a state of agreement that financial literacy is something that should be taught in the classroom. According to a 2022 poll from the National Endowment for Financial Education 88% of adults said their state should require a semester or year-long financial education course for graduation.

Crippling Student Debt

When it comes to important financial topics, student debt is one of the biggest issues. According to the federal reserve, as of the third quarter of 2023, Americans owed $1.74 trillion in education debt. 51% of 2021-22 bachelor’s degree recipients graduated with an average of $29,400 in student loan debt. Among all borrowers, the average student loan debt in 2023 was $38,290. Student loan debt is now the second highest consumer market behind mortgages. 

While student loans are a valuable tool, many young adults don’t understand the impact and commitment when making a college decision at age 18. Additionally, social media trends have allowed student loan debt to become something that is glamorized.

Within the last month alone, a new trend has swept across Tik Tok where young students talk about attending schools like UGA or College of Charleston, only to accumulate a six figure student loan debt, while romanticizing factors like the beach or game day making the financial commitment worth it.

As people continue to use social media to romanticize student debt, without a genuine understanding of how interest accumulates and how long a payoff plan could potentially take, more individuals may take on financial commitments that they are unprepared for. It is important to have a good understanding of whether or not family can contribute, what your interest rates look like, estimations for monthly payments, and common salaries for your specific degree. While social media can be a powerful educational tool, it has the power to mislead. Financial information and education should always come from verified sources.

Resources like federal student aid will always be less expensive in comparison to private student loans. Private student loans can also be a powerful tool, but it is good to shop around for the best rates and avoid taking out too many private student loans. Regardless, one rule of thumb for student debt is that you should try not to borrow more than the first year salary you can expect in your chosen field. 

Trevor Dorman is a current senior at the University of Southern California, where he is studying business. Despite USC being his top choice, he also made the decision to come because after financial aid had been taken into account, USC was one of his most affordable options. Despite this being the case, he takes out both federal and private student loans each year to cover tuition, rent, and living expenses. 

“One of my biggest concerns for post-grad is figuring out a plan to quickly pay off the student debt I have accumulated over the last few years. Despite being far from six figures of student debt, cost of living is so high in our current economy that it is hard to find an entry level job with a salary sufficient enough to cover life expenses, plan for the future, and pay off debt,” said Dorman. 

In the state of California, the median salary for college graduates is around $63,000 (the 6th highest of all 50 states). According to Forbes, paying off a $100,000 student loan debt with a payment of $1000 per month would take 120 months, or ten years. Not only is this over a decade of paying off loans, but for those with a 60k salary in the state of California, they can expect to see a net pay of 3800 a month. If an individual were expecting to pay one grand for rent, and one grand on student debt per month, this is over half of one’s salary gone every month for the next decade. Salary expectations also have to be considered based on a degree, as some majors like engineering or computer science have much higher starting salaries, swaying the median salary upwards. 

Willa Dorgan, a senior at The University of Southern California, chose to pursue a degree in economics because of job and financial stability. She felt that choosing another major such as environmental science, which is more in line with her passions and interests, would equate to significant risk down the line. She spent her summer interning as a consultant for KPMG, a global accounting and consulting firm.

“I feel we live in a world where people press the importance of a college degree. However, I also feel we have gotten to the point where the cost of a degree is not worth the job opportunities in all industries. While this isn’t a traditional aspect of financial literacy people consider, it is important for people to be aware of job opportunities based on their degree,” said Dorgan. “A $200,000 degree is not always worth the job opportunities it results in.”

Higher Level Education and Financial Literacy

While student loan debt is a serious problem that lacks an educational foundation in America, it is only one of many topics not taught that is impacting the financial wellbeing of students and individuals across America. Lori Shreve Blake is the Senior Director of Career Engagement at USC. She has worked at USC for the last 24 years where she tries to help students enter the workforce. Every year she organizes a financial literacy conference to help educate USC students.