(THOUSAND OAKS, Calif. – Feb. 5, 2020) In response to a federal recommendation and student requests, California Lutheran University this semester joined a small but growing number of colleges offering a for-credit personal finance course.
The U.S. Financial Literacy and Education Commission, which includes members from the U.S. departments of Education and the Treasury, last year recommended that higher education institutions require financial literacy courses to equip students to make critical decisions during and after college.
“It’s not if, but when, this mandate will come from either the federal or state level,” said Chia-Li Chien, director of the financial planning program at Cal Lutheran. “Higher education institutions must be prepared to have such a course in place to meet the requirement.”
Chien helped develop Introduction to Personal Finance, the new optional one-unit elective being taught by William Klepper, a senior adjunct faculty member and certified financial planner with more than 30 years of experience. Cal Lutheran began with one section, hoping to attract 18 students. Enrollment has climbed to a near-capacity class of 22 as students continue to add it. The course covers saving, taxes, credit scores, bank accounts, budgets, loans, housing decisions, investments and risk management. Students will put together budgets and financial plans for themselves.
“Understanding spending limits and being conscious of financial decisions during college will help students establish good financial behaviors before they enter the workforce,” said Chien, an assistant professor in the School of Management. “These foundational skills will go a long way toward helping students reach their goals in life.”
Even though many U.S. students take out loans to help finance their education, a 2019 Trellis Research report found that only 21% of undergraduates could correctly answer three questions related to loan terms, interest rates and repayment options. In a 2018 Brookings Institution study, U.S. undergraduate students demonstrated low levels of financial literacy, with just 28% getting three multiple-choice questions on inflation, interest and risk diversification correct. The study showed that financial knowledge was lower among students in underrepresented racial and ethnic groups and from disadvantaged socio-economic backgrounds.
Although personal finance courses are popular with students, a 2011 report from the Financial Security Project at Boston College found that offerings are sporadic with about 100 U.S. colleges offering for-credit classes. Community colleges were the first to adopt the courses in large numbers, the report said. A few universities mandate that all students complete a for-credit financial literacy course, and others require a short online module. An increasing number of universities have begun offering optional workshops, with Harvard and Princeton universities offering them for the first time last year.