Association for Public Policy Analysis & Management

Many college students struggle to meet their basic financial needs even when they receive financial aid (Goldrick-Rab, 2016). The inability to meet the costs of college can generate worry, which in turn can erode students’ ability to succeed academically. Indeed, emerging research has shown that financial worry can undermine a person’s cognitive functioning (Mullainathan and Shafir, 2013) to the detriment of their performance (Meuris and Leana, 2018) because students will carry their financial concerns with them as they go to their classes (Meuris and Leana, 2015).

To investigate the impact of students’ financial worry on their academic performance, we first collected archival and survey data from the incoming class of freshmen at a large public northeastern university (n=980). We found a strong relationship between SAT scores and GPA among students who reported having no financial concerns at the beginning of the semester, but a null relationship among the approximately 20% of students who reported having some or significant financial concerns. This finding held when controlling for reported household income, hours worked, whether or not the student completed university-provided financial literacy training, and all available demographic factors. While correlational, this finding suggested that students who reported that they had financial worry were, due to this worry, not able to realize their academic potential.

In a second study, we tested a low-cost intervention designed to reduce financial worry, and as a result, improve academic performance among financially-stressed students. To this end, we developed a semester-long text-messaging intervention where we randomized incoming freshmen (n=704) to receive no text messages (control group), text messages informing them about financial resources available throughout the university, such as financial counseling, food banks, and student discounts (financial resources group), or text messages with financial resources and an additional message aimed at normalization, including messages that indicated that many students experience financial stress at college, and are able to access financial resources to help (normalization group). We found that, relative to the control group, only assignment to the financial resources group reduced financial worry for students, and did so primarily among students whose aid packages did not cover all of their living costs. Further, the reduction in financial worry from the beginning to end of the semester raised financially-worried students’ first-term academic performance to levels indistinguishable from that of their less-stressed counterparts.

In aggregate, these results suggest that financial worry threatens students’ academic performance, and thus, warrants institutional attention. Moreover, we illustrate that practically-oriented text messages can address financial worry and its consequences. Future work may explore the null effect of normalization messages; while our power may simply have been insufficient to understand the conditions under which the normalization of financial worry is helpful, these findings suggest that a sense of universal financial strain may undermine the effects of concrete financial tips and offers on student well-being.