The Effectiveness of Personal Financial Planning as a Tool in Reducing Debts amongst Students.

Abstract
A proposal for a dissertation concerned with personal financial planning and student debt. The proposed project combines secondary and primary research to investigate levels of student debt, attitudes to debt, awareness of tools for financial management and the use of such tools. A structure for the dissertation is set out including an overview of the background to the study, a schematic literature review and methods for data collection and analysis.
1. Introduction

The following sets out the structure of a proposed dissertation study looking at personal financial planning and student debt.
1.1 Background / Rationale
There is an increasing need for financial management amongst students. Recent social changes mean that people are more willing to take on high levels of personal debt, and last year’s changes to funding of higher education courses mean that students need to take on more debt to finance their futures. However, this also means that students are at more risk of unmanageable debt and that they need to learn how to handle financial commitments. In addition, there is currently no compulsory financial education within the UK for young people. There is some current provision through Mathematics, PSHE and Citizenship as well as extra-curricular activities, and also through government funded initiatives including the ‘Personal Finance Education Group’, but little unified financial education (Teachernet, 2009). This lack of adequate training means that students arrive at university ill-equipped to manage their finances, despite an increasing need to do so.
This study will investigate this area. In order to understand how students can best be equipped to handle these increasing debt commitments, it is first necessary to understand how current students think of and handle their debts.
2. Aims and Objectives
The overall aim is to identify the current level of financial literacy amongst university students. This overall aim can be broken down into three areas:
1. to uncover current steps taken to reduce and manage student debt, both in terms of measures taken by the students themselves and in terms of drives by universities and government to implement this. This will also involve identifying the extent of debt amongst students, to what extent the students see this as a problem, whether students take any steps to handle the debt, and if so what they are. It will also involve looking at university programmes to identify and educate about debt, and to what extent students are aware of these, and how effective they are.
2. To assess the awareness of personal financial planning amongst students. This involves uncovering the nature of financial planning, perhaps looking at various definitions, as well as finding out whether students are aware of the concept.
3. To appraise the effectiveness of such personal financial planning as a tool to reduce student debt. Not all students will be aware of financial planning, and of those who are aware, only some will have any useful depth of knowledge. Even less will practice such planning. The extent to which students practice such planning needs to be determined before assessing, for those who use the tool, how effective it is. This aim will also need to determine how effectiveness is measured.
3. Literature Review
The dissertation will consist of both primary and secondary research. Secondary research consists of already published information. This can be internal to the organisation (university) under review, or external, derived from sources such as academic journals, textbooks and. ((McDaniel and Gates 1998, pp. 74-75).
The literature review is likely to cover the following areas:
3.1 Background
What is the extent of student debtAre there any historical patterns suggesting debt is increasingIn 2004-5, English students typically owed ?8,127 over the year, compared with Scottish students debts of ?5,099 (Callender and Wilkinson, 2007). This is likely to have increased already, and also likely to increase in coming years as recent legislations mean that universities in England will be able to charge higher fees for tuition from 2012 (Coughlan, 2010).
3.2 Wider Issues
This section will look at the wider background including changing attitudes to debt, the nature of student loans, the likely impact of the increase in tuition fees, and the extent of current education about financial management. Nowadays students need to be comfortable with higher levels of debt than ever before, and social changes during the 90’s and first decade of the 21st century meant debt has become more acceptable. The boom years between 1997 and 2007 in the UK meant consumers were increasingly able to take on debt, which fuelled rising rates of personal bankruptcy in 2007-2008 (Fisher and Lovell, 2008). By October 2008, UK personal debt had risen 4.7% on the previous year, and at ?1455bn it was higher than the UK GDP (Smart, 2010).
3.3 Measures Against Debt
What measures are currently taken to address student debt by universities and / or other bodiesTo what extent are they effectiveWhat measures are taken by students themselves, independently of their universities, and to what extent are these effective?
3.4 Personal Financial Planning
This section will look at the nature of personal financial planning, including whether there are different theoretical and / or practical approaches to the subject. One definition of the concept is ‘whether and how an individual can meet financial objectives through management of financial resources’ (Harrison, 2005). This section will also look at awareness of personal financial planning amongst students, the extent to which students practice such planning and what form they practice it in, and any available research regarding the effectiveness of this.
4. Project Strategy
The project will involve a primary research phase, studying students, debt and financial planning through a questionnaire. The questionnaire will gather primarily quantitative data, but also a smaller amount of qualitative data. Quantitative research is sometimes considered more ‘scientific’, and starts with a hypothesis or research question which is then tested by collecting data to confirm or reject. It is primarily numerical and a more fixed approach. By contrast, qualitative data is non-numerical, and can capture the richness of experience. It starts with less defined ideas and aims to generate conclusions through a continual process of reflection (Babbie, 2010). As the study involves investigating a number of research areas which are already well formulated, the questionnaire will gather data to throw light upon these areas. The questionnaire will consist of a number of questions, primarily with pre-defined answers, for example, ‘are you currently in debt’, ‘what is your current level of debt’, ‘how do you manage your debt’. In addition, it will include fewer questions to elicit ‘open-ended’ responses. Open questions invite verbatim, unstructured answers, and investigate feelings (Brace, 2008). In this case, they might include ‘how do you feel about being in debt’. The questionnaire will also collect demographic data. By combining quantitative data with qualitative responses, the study will also utilise a ‘mixed methods’ approach. The qualitative data will provide more context for understanding the numerical data, and throw light on possible relationships between areas to be studied (Blaxter et al, 2006).
Respondents will be drawn from the existing student population, and will be recruited by word-of-mouth, student notice-boards and electronic mailing lists. There is a danger of recruiting a biased sample, as the people who take part might not be representative of the whole population to be represented (Babbie 2010), in this case, students in general. It is possible that those who want to take part already have strong feelings about debt, or that the university population does not represent the UK university population as a whole. The use of a sampling frame to match selected respondents to the larger group in order to eliminate bias will be considered.
In order to minimise cost, maximise number of respondents and speed of response, questionnaires will be distributed by email, although there are some disadvantages of this method including lower response rates and the danger that respondents might not understand questions. Research should be conducted ethically, aiming to be objective and confidential and treating all involved fairly (Coldwell, 2004). Respondents will be informed of the purpose of the study, that their responses will be anonymous, and that they can withdraw at any time. They will be asked to sign a consent form. Once collected, numerical data will be analysed in terms of frequencies and basic statistics using a spreadsheet package such as Excel, or a statistics application such as SPSS.
The research is limited to students at one university. The study also looks at attitudes to debt of current students, not how this has changed over time. It also does not look at how students deal with debt after the new increases in fees. It is possible that more help will be available to them in the future.
5. Key Stages
Submit draft proposal (28th Jan 2011)
Feedback on draft proposal
Amend proposal if necessary
Literature review
Refine research areas / questions if necessary
Devise and test questionnaire
Respondent recruitment / interviewing
Data analysis / coding open-ended responses
Data / information interpretation , discussion, conclusion
Write final project report
Final project report handed in (13th May 2011)
6. Conclusion
The above has set out a proposal for a dissertation concerned with student debt in the UK. Details of the study background, literature review and methodology are discussed, and key stages outlined.
7. References
Babbie, E. (2010) The Practice of Social Research (12th edn.), Belmont CA: Cengage.
Blaxter, L., Hughes, C. And Tight, M. (2006) How to Research (3rd edn), Maidenhead, Berks: McGraw-Hill International.
Brace, I. (2008) Questionnaire Design: How to Plan, Structure and Write Survey Material for Effective Market Research (2nd edn.), London: Kogan Page.
Callender, C. and Wilkinson D (2007) “Higher Education Students’ Income, Expenditure, and Debt: A Comparative Study of Students in Scotland and England 2004-2005”, Scottish Executive, http://www.scotland.gov.uk/Publications/2007/03/01154326/0 [26th January 2011]
Coughlan, S. (2010) “Students face tuition fees rising to ?9,000” bbc.co.uk, http://www.bbc.co.uk/news/education-11677862 [26th January 2010)
Harrision, D. (2005) Personal financial planning: theory and practice,Harlow, Essex: Pearson Education.
Herbst, F. And Coldwell, D. (2004) Business Research (2nd edn.), Cape Town: Juta and Company Ltd.
Jackson, S. (2008) Research Methods and Statistics: A Critical Thinking Approach (3rd edn.), Belmont CA: Cengage.
Lovell, A. (2008) Business ethics and values: individual, corporate and international perspectives (3rd edn.), Harlow, Essex: Pearson Education
McDaniel,C. D. (1998) Marketing research essentials, Cincinnati: Taylor & Francis.
Smart, B (2010) Consumer Society: Critical Issues & Environmental Consequences, London, SAGE Publications Ltd
Teachernet (2009) “Teaching young people about money” http://www.teachernet.gov.uk/teachingandlearning/library/youngpeopleandmoney/ [January 27th 2010] Blaxter, L., Hughes, C. And Tight, M. (2006) How to Research (3rd edn), Maidenhead, Berks: McGraw-Hill International.
Bibliography
Callender, C., (2003) Attitudes to debt: School leavers’ and further education students’ attitudes to debt and their impact on participation in higher education, London, Universities UK.
Jackson, S. (2008) Research Methods and Statistics: A Critical Thinking Approach (3rd edn.), Belmont CA: Cengage.
Van Dyke, R., Little, B. and Callender, C. (2005) Survey of higher education students’ attitudes to debt and term-time working and their impact on attainment, Bristol: HEFCE.