CFEE Guidebook

8 BUILDING FINANCIAL CAPABILITY THROUGH FINANCIAL COACHING Fostering Economic Mobility The key to economic mobility is to give stu- dents the capacity to plan for the future and understand the connection between the actions they take today and the goals that they hope to achieve tomorrow. Through the coaching pro- cess, students will learn how all of the elements of personal finance can work together to create economic security for the future. One of the biggest challenges for the typical community college student is saving money in light of income and expenses that may swing wildly frommonth to month. For the majority of those who live paycheck to paycheck, the prospect of saving money is a challenge. Coach- ing teaches students that saving money is made possible through a series of actions: tracking expenses, creating a budget, and making lifestyle choices. Financial coaching is uniquely effective in helping students to stay on track, because the coaching sessions give them timely feedback as well as encouragement to readjust if they fall short of their plans. A lack of financial cushion is one of the main contributors to student financial vulnerability. Coaching can help students learn techniques that work for them. Over the five-year time frame of our program, we were able to report an increased amount of average savings per participant every year, from $330 in 2015 to $1,642 in 2019. For most participants, it is the first time in their lives they have been able to accumulate savings. More importantly, it provides confidence in their ability to continue their education and manage their future college expenses. Learning to manage debt and reduce out- standing obligations can also have a significant impact on a student’s ability to build assets for the future. One of the advantages of com- munity college is its relatively low tuition as compared to a four-year school, so students do not need to take out large amounts of student loans. However, many students struggle with excessive amounts of debt, either from credit cards, automobile loans, or student loans from colleges previously attended. For some students, their debt burden means that they are continually stretched to cover their current college expenses, such as tuition and textbooks. Students who may have delinquent or defaulted student loan debt from a former institution may find themselves disqualified from receiving financial aid, if they continue their education at a community college. Finan- cial coaching can assist students in addressing these problems by helping them to learn techniques of debt management and making them aware of the options they may have for debt reduction, repayment, or forbearance. Many of the participants in our Money Smart coaching program have been able either to reduce debt significantly or eliminate their personal debt completely, which allows them to go on to build savings toward other important personal goals. In a single year of our coaching program, the group of students who were focused on reducing debt was able to achieve, on average, $2,570 of debt reduction, which provided them with enormous financial flexibility. Debt reduction also helps students improve their credit scores, which enables them to access higher amounts of credit at more afford- able interest rates. Students in our program who had a goal of improving credit were able to achieve an average credit score improvement Students in our program, who had a goal of improving credit, were able to achieve an average credit score improvement of 37 points, which translates to more advantageous interest rates and better access to credit.