College Grads Cite Student Loan Repayment as Top Concern, but Overlook Key Ways to Build a Solid Financial Foundation, Says Capital One Survey

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May 18, 2011, 09:52 ET

Survey suggests that male college seniors and recent college grads are taking more proactive steps to manage finances compared to female peers

MCLEAN, Va., May 18, 2011 /PRNewswire/ -- Many of the 1.7 million(1) students expected to graduate from college this spring will soon begin repaying student loans, which average close to $23,000 for this year's graduating class, according to a recent study from FinAid.org and Fastweb.com. A new Capital One Financial Corporation (NYSE: COF) survey of college seniors planning to graduate this spring and recent college graduates finds that of the 69 percent who have undergraduate student loans to repay, 60 percent are very or somewhat worried about their ability to pay back their loans. Two-thirds (66 percent) say that having student loans to repay will have an influence on the job they take or the career they pursue.

Spending and savings trends

Personal finances, including managing credit and loans, are clearly a priority and a cause for concern for many young adults – in fact, 55 percent of survey respondents say that they are "very concerned" about building a positive credit history. However, while most current and recent graduates (62 percent) believe they are "highly" or "very" knowledgeable about personal finance and money management, many admit to impulse buying and overlooking opportunities to improve their finances. When asked about their saving and spending habits:

Only 43 percent of survey respondents say that they are putting money in savings on a monthly basis or more;
One-third (36 percent) admit they are not setting aside money for savings on a regular basis; and
If given $500 to save or spend, 74 percent of the young adults surveyed say that they would spend at least $100 of it and 44 percent would spend at least $300.

The survey also asked college seniors and recent graduates about their "impulse buy threshold," the amount above which they would not feel comfortable making an impulse purchase. While half (53 percent) of respondents said that their personal threshold is below $100, a significant percentage (33 percent) said they would hold back on an impulse purchase of $100 or more, with 9 percent saying that their personal threshold is $300 or more.

"By the time they graduate from college, most young adults have begun to establish a credit history – most have student loans and many have a credit card in their name. These survey results suggest that most new college graduates understand the need to manage their money – particularly their credit – carefully. However, the results also highlight the need for young adults to take a look at their spending habits and prioritize savings as a way to build financial security," said Dr. Mary Ann Campbell, who teaches personal and family finance at the University of Central Arkansas.

Evidence of gender differences

The survey data suggest that male respondents are somewhat more proactive than their female peers when it comes to managing their personal finances.

Half (50 percent) of males surveyed report that they are putting money away in savings monthly or more compared to 40 percent of females surveyed.
Males are also more likely to use mobile and/or email alerts to track their credit card balances and due dates – 68 percent of males graduating this year or who recently graduated college reported using mobile and/or email alerts compared to 55 percent of females.
Finally, 44 percent of male respondents check their credit report at least once each year as recommended, but only 35 percent of females follow this recommendation. One-in-five (21 percent) females surveyed have never checked their credit report compared to 12 percent of males.

"It's important for all young adults to recognize the impact the financial choices they make can have on their future and examine their financial habits with an eye toward saving for the future and building a strong credit history," said Shelley Solheim, director of financial education for Capital One. "For parents whose children are graduating high school or college this year, graduation is an opportune time to have the conversation about how money management fits into their children's future plans."

Parents looking for tips on talking with teens and young adults about money can visit BankIt.com, a financial literacy program that aims to help parents and young adults understand, talk about, and manage their money. Through an interactive Web site and workshops on 12 key financial topics, the program empowers families to explore budgets, goals and strategies for making financial choices that matter to them. Bank It was developed collaboratively by Capital One and Search Institute, a leader in positive youth, family and community development.

Credit knowledge and habits

The survey also found that current and recent college graduates who have a credit card of their own are more knowledgeable about credit terms and credit scores than those without a card, suggesting that more students who decide to take on the responsibility of a credit card are doing their homework.

Just over half (55 percent) of college seniors polled currently have a credit card of their own, while 78 percent of graduates from 2008-2010 have their own credit cards.
While 55 percent of current and recent graduates without a credit card know that paying on time is the most important factor in determining one's credit score, 74 percent of those who have a card know this important information.
Similarly, only 52 percent of respondents without a credit card correctly identified what APR means, but 74 percent of those with a credit card answered correctly.

Effectively managing credit requires a solid understanding of some key credit "Rules of the Road." Young consumers can access useful financial tools, answers to common questions about credit and a broad range of credit education materials at www.capitalonejourney.com. These materials are designed to help students learn about credit and make good financial choices. Capital One's Journey(SM) Student Rewards Credit Card is designed to help college students build their credit with confidence and reward them for responsible credit use.

Survey Methodology
The findings reported in this release are from a telephone survey conducted by the opinion research firm, Braun Research of Princeton, New Jersey. The survey was sponsored by Capital One Financial in McLean, Va. Braun Research completed 403 interviews with college students graduating in 2011 as well as recent graduates from 2008-2010 throughout the United States. All interviews were conducted by telephone. All interviews were with qualified respondents selected at random. The interviews were conducted April 1-27, 2011. The margin of error is plus or minus 4.9 percentage points at the 95% confidence level. Interviews were monitored at random. Sampling for this study was conducted using a national probability replicate sample. All interviews were conducted using a computer assisted telephone interviewing system. Statistical weights were designed from the United States Census Bureau statistics.

About Capital One

Capital One Financial Corporation (www.capitalone.com) is a financial holding company whose subsidiaries, which include Capital One, N.A. and Capital One Bank (USA), N. A., had $125.4 billion in deposits and $199.3 billion in total assets outstanding as of March 31, 2011. Headquartered in McLean, Virginia, Capital One offers a broad spectrum of financial products and services to consumers, small businesses and commercial clients. Capital One, N.A. has approximately 1,000 branch locations primarily in Texas, Louisiana, New York, New Jersey, Texas, Louisiana, Maryland, Virginia and the District of Columbia. A Fortune 500 company, Capital One trades on the New York Stock Exchange under the symbol "COF" and is included in the S&P 100 index.