Over the course of two nights in early August 2016, as Cubs mania was only just beginning, nearly 40 recent college graduates gathered at a non-descript office building just 12 miles from historic Wrigley field. While many were avowed Cubs fans, baseball and World Series dreams were not on the agenda.
Instead, this group of highly educated 20-somethings had been invited by Credit Union Student Choice to participate in a series of focus groups in order to share their insight on a variety of financial topics. Aside from their college degrees, the participants shared another commonality — student loan debt. In fact, half of the group had a private student loan from a credit union.
I had the unique opportunity to observe the focus groups and then attend Empower U 2016 where the results of these sessions were shared with attending credit unions. While much has been written and hypothesized about these highly coveted college-educated millennials, the insight they shared, and the candor with which they delivered it, was often amusing, at times sobering, occasionally surprising, and ultimately fascinating.
“Student Loans Are The Cost Of Opportunity”
While it may be surprising to many, not all of today’s college students are buried under student loan debt. In fact, statistics show that one in three bachelor’s degree recipients take on absolutely no debt, and another 25% take on less than $20,000 over the course of their entire educational program. For the sake of our focus groups, however, we zeroed in on those with significant student loan debt to try to get a better understanding of this specific group. Not surprisingly, participants had strong feelings about this highly sensitive topic.
When asked to describe their emotions about their loan debt, the responses ran the gamut and included:
While the responses definitely conveyed the angst felt by many, one participant also summed up the overall mood very well by saying, “Student loans are the cost of opportunity.” Many agreed with this sentiment and viewed college as a necessary investment. Despite their student loan debt, nearly everyone said they would not go back and significantly alter their college experience.
And based on recent data, it appears these borrowers are correct in their feelings about the “cost of opportunity”. According to research from the Urban Institute, “the median student who graduates from high school, enrolls in college full time at age 18, and earns an associate degree after three years will, at age 28, surpass the cumulative earnings of the median high school graduate who went straight into the labor force. The median student who earns a bachelor’s degree after five years of full-time study will pass the break-even point at age 30, even without any earnings while in college.” The Institute also points out that while those who borrow for college will take a little longer to break even, the “impact is small”.
In regards to their existing student loan debt, many participants expressed interest in refinance and consolidation options. They also understood, however, that there are definite pros and cons, and felt some uneasiness about refinancing loans without having a trusted advisor (preferably an actual, real live person) provide some guidance through the process. This yearning for personal advice (in addition to online information) was something that was heard over and over again.
“Nobody Needs A Financial Advisor More Than An 18-Year-Old.”
One of my biggest takeaways from the focus groups was the fact that nearly all participants described, in great detail, how little they and their parents knew about college planning and funding. They simply didn’t know where to turn for impartial advice. Several pointed out that high school guidance counselors are focused on getting kids admitted to colleges, regardless of cost, while college financial aid officers are most certainly selling their college.
Many credit unions pride themselves on their delivery of financial education into the communities they serve. It is clear from focus group feedback that there is a tremendous need to integrate college planning and funding resources into your financial literacy program, not just for the benefit of students, but also parents.
The vast majority of participants indicated that parents (many of whom had been battered by the Great Recession) handled nearly all aspects of college planning and funding, including student loans. Several stated that their parents basically told them to go the college of their dreams and “we’ll figure out how to pay for it later”... not exactly great advice. Developing a college-bound financial literacy initiative aimed squarely at students and parents that highlights college as an investment, outlines educational options, and highlights the long-term implications of debt in comparison to field of study/career choice could resonate with members.
Northern Credit Union ($240.9M, Watertown, NY) in New York is even going a step further. It is attempting to partner with high school guidance counselors at its FAFSA seminars, so while learning about financial aid, students can also get help choosing colleges and majors that will be more likely to help them find a job after college.
“I Went Where My Parents Told Me.”
As I listened to participants discuss how they chose a financial institution, the phrase that kept popping into my head was “the more things change, the more they stay the same.” Over and over participants mentioned two key things:
Convenience of branches and ATMs
While we often hear about the importance of technology and the potential for young adults to “disrupt” the financial industry, I heard very little that was any different from when I first entered the credit union space in 1999. As a proud Gen X-er myself, it almost felt like I had been transported back in time to my own post-college years.
Parents, and friends to a lesser degree, played a hugely important role in influencing where these young adults opened financial accounts. Many still had a relationship with the financial institution their parents first helped them establish, while those who had switched pointed to branch and ATM convenience as the key factor.
Other than using Venmo to pay friends, very few mentioned any sort of financial technology as having a huge impact on their life. Turns out that in 2016 young adults still like seeing a branch and having easy access to ATMs.
One participant also shared a story about how a bank employee sat with her for more than an hour explaining every facet of credit cards. Heads nodded vigorously around the room as many agreed they want personal advice, not just online information. While technological bells and whistles are important and needed, it was very clear that demand for the personal touch isn’t going away anytime soon.
Some retailers may have already figured this out. Another excerpt from the e-book “Millennials: How Credit Unions Can Build, Strengthen, and Maintain Lasting Relationships” points out that brands like Build-a-Bear Workshop and American Girl were on to something in the late 1990s when they opened retail stores which provided consumers with experiences. They didn’t just want consumers to buy their products, they wanted consumers to experience their products. Those two companies are still in business today and may have been the trail blazers for what Millennials now expect to be the norm in retail shopping.
“Credit Unions Are More For The People.”
In closing each focus group session, we asked about the difference between banks and credit unions. Not surprisingly, participants struggled for specifics but most knew something was different. One person pointed out that, in her opinion, credit unions were “more for the people” while banks were “corporatized”.
Everyone agreed they liked that idea in theory, but it was also clear that it will take the right product mix (including student loans), personalized financial guidance, and convenient access to their money to win their business.
As the old saying goes, "the more things change, the more they stay the same."
Michael Weber is the chief marketing officer for Credit Union Student Choice.
This Partner Perspectives has been updated from the version that appeared originally on CreditUnions.com in November 2016.