Financial Literacy as a Path to Student Success
Students who enter college without strong financial understanding often face challenges that follow them well beyond graduation. The decisions they make about loans, financial aid and budgeting in school can shape their financial stability for years to come.
Students may take on more debt than necessary because they lack a clear understanding of repayment structures and how borrowing accumulates over time. Others miss out on scholarships, grants and alternative sources of funding by missing the FAFSA deadline or overlooking programs like 529 savings accounts. Mismanaging the resulting debt can restrict access to future opportunities like purchasing a home or car, saving for retirement or even completing a degree in the first place.
Put simply, gaps in financial literacy can make college more expensive, more stressful and more likely to end in unfinished degrees or long-term financial setbacks. Real solutions require institutions, students and families to play a role in building a strong foundation for financial well-being.
Minimizing Borrowing Through Early Planning
The most effective way to manage student debt is to reduce the need for borrowing in the first place. Students and families can do this by actively pursuing scholarships and grants, both from their institution and external providers. Parents can also prepare in advance by investing in a 529 savings account, which grows tax-free and can be used for qualified education expenses like tuition, fees, books, supplies and even certain housing costs.
Utilizing these tools ensures loans become a backup option rather than the primary source of paying for college.
Equipping Students to Borrow Responsibly
Without a clear picture of how various decisions could impact their future, it’s easy for students to overborrow. To address this, more institutions are embedding financial tools directly into the financial aid process so students don’t have to navigate the system alone.
At Western Governors University (WGU), for instance, the borrowing process is designed to ensure individuals clearly understand what they will actually owe after grants and scholarships are applied, giving them an accurate picture of the real cost of their education. Students are also encouraged to limit borrowing to direct costs like tuition and fees, reducing the risk of taking on unnecessary debt.
WGU also provides a loan scenario calculator that shows students how the outcomes of their borrowing decisions change over time. The tool provides each student with their current cumulative loan balance from the Department of Education and a recommended borrowing amount. From there, they can use the calculator to see how their debt will change if they continue borrowing at the same pace and how those choices will affect their future monthly payments. This type of tool transforms vague debt estimates into concrete figures students can understand and manage.
By embedding these tools into the aid process, students advance only once they understand the full picture of their financial decisions.
Building Financial Literacy Through Learning and Practice
Institutions are developing programs that teach students essential financial skills while also creating opportunities to apply what they learn in real-world ways
At WGU, students can take short courses that cover practical topics such as how to complete the FAFSA, manage credit, plan for retirement and navigate mortgages. These courses are designed to be accessible and straightforward while giving students a stronger foundation for everyday financial decisions.
Other initiatives focus on reinforcing habits of saving and planning. For example, Earn to Learn, which empowers students to be workforce-ready with little to no student debt, provides Pell-eligible students in WGU’s School of Education and in certain rural communities with an 8:1 scholarship match. A student who saves $500 in a matched-savings account can see that grow into $4,500 through combined matches from WGU and Earn to Learn. The program combines these savings with financial training and education success coaching to give students the opportunity to apply what they learn in real life.
Extending Support Beyond Enrollment
Financial challenges do not end the day a student leaves college. Loan repayment becomes the next major hurdle, and without guidance, it’s easy for borrowers to miss deadlines, fall behind on payments or damage their credit.
To ease that transition, many institutions like WGU partner with organizations like Student Connections to provide proactive outreach to all former students, whether they graduate or not. These individuals receive reminders when interest begins to accrue, notifications of when repayment will start and guidance on what to expect from their loan servicers. If payments become more than 90 days overdue, outreach continues—not as debt collection, but as a support system to explain options, protect credit and prevent further delinquency.
This kind of support extends the community of care beyond enrollment and helps individuals maintain financial stability even after they leave their institution.
Meeting Students Where They Are
Students come to college with different levels of experience managing money. Some are already comfortable with budgeting and borrowing while others are facing these responsibilities for the first time. Because of this, institutions must provide more than one pathway to building financial literacy. Whether through structured guidance, interactive tools or personalized counseling, providing a variety of options helps students engage in ways that make sense for them.
Laying the Groundwork for Financial Wellbeing
Financial literacy shapes the choices students make before, during and after their higher education journey. When students have the knowledge and support to make informed financial decisions, they are more likely to stay on track academically, avoid unnecessary debt and graduate with confidence in managing repayment. Financial literacy lays the groundwork for long-term financial well-being, the kind of stability and security that higher education promises.
Resources to Explore and Take Action
Apply for scholarships and grants to lower college costs.
Consider investing in a 529 savings account to save for education with tax advantages.
