Hit hard by a deepening recession during first quarter 2009, students were faced with tough choices – and in some cases, panicked.
A study by the University of Arizona showed that students struggled with the financial recession just as adults did – and their experiences could echo through the economy for years.
In an Arizona Pathways to Life Success study, paid for by the Denver-based National Endowment for Financial Education during November 2009, 95 percent of student respondents said they had changed their personal money management in response to the recession.
In some cases, there was a positive change. Budgeting, for example, rose roughly 3 percent among students who felt the most impact from the crisis.
The most dramatic changes, however, occurred at the opposite end of the spectrum, in behaviors the study categorized as high-risk:
169 percent increase in the number of students who reported dropping classes
106 percent increase in those taking a “leave of absence” from school
78 percent rise in the number of students who report postponing health care
26 percent increase in students using one credit card to pay off another.
Researchers also, however, saw an alarming increase in debt among students. Students reported credit card debt up 60 percent and education loan debt up more than 85 percent compared to spring 2008. For some ethnic groups, the rates of increase were double and triple those of the overall sample.
The economic crisis had a definite affect on the students’ perceptions of their financial capabilities – rating themselves 19 percent less knowledgeable that when previously surveyed during May 2009.
And most have lost their trust in the nation’s financial infrastructure.
An “overwhelming” majority of students in the latest wave of data reported “only some” trust in government, business, banks and other major institutions. And 20 percent said they harbored “hardly any confidence” in these entities. APLUS researchers note that this crisis in confidence could have far-reaching implications as it interferes with the normal formation of social capital.
“For young people who are just beginning to establish independent relationships with banks and financial institutions, a growing lack of confidence following this severe recession may inadvertently slow the economic recovery,” said lead researcher Soyeon Shim, Ph.D. “A sense that financial institutions are not trustworthy may cause young people to avoid investing in their services, to the detriment of students and that of the overall economy.”