Last week I joined researchers, policymakers and innovative practitioners at the HEQCO Fear of Finance: Financial Literacy and Planning for Post-Secondary Education conference. Kudos to the HEQCO team for putting on a fantastically relevant conference that brought these diverse groups together; it doesn’t happen very often, and it was engaging for participants step out of our usual silos for a couple of days.

I presented on what I call financial aid literacy in PSE; that is, what students and their parents know about financial aid. Although, as we shall see, it’s what they don’t know that’s the important/scary part.

In 2009, as part of some work done for a coalition of student groups, we asked 14,500 Canadian students to complete a simple seven-question financial aid quiz which included questions about assistance eligibility and repayment. Three-quarters (!) of students failed and a mere 10% received a “B” grade or better. Knowledge improved with age, and Anglophone and Francophone students performed better than Allophone ones. The best news was that government loan recipients received higher scores than their non-recipient counterparts, though the difference in scores was small and both groups still overwhelmingly failed.

The sources students used to learn about student aid had a very strong impact on their level of financial aid literacy. Word of mouth from friends (used by 57% of students) and family (51%) were the most commonly-cited sources; however, students who relied on these sources performed the worst of all on the quiz. The second set of most popular sources were financial aid officers (33%) and government websites (32% for provincial and 23% for federal); students who used these sources performed significantly better than average, and much better than those who didn’t use any of them.

Though Canada has a pretty good financial aid system, especially with the recent increase in grant funding, financial illiteracy has a potentially significant and detrimental impact on access, persistence, loan repayment planning and default. The silver lining to a huge problem of better informing students, parents, guidance counsellors and financial aid administrators is that it is primarily one of public relations and knowledge mobilization. Compared to overhauling financial aid programs, it’s a cheap problem to solve. But it’s still a very difficult one: there is very little precedent from which to work. The HEQCO conference was a great start to thinking about this problem and I look forward to more discussion, not only of the problems, but also of the solutions.