I recently reviewed a survey that indicated that a certain segment of the population is rewarded less private scholarships than those of higher income brackets. After reading this survey, it gives a resounding reason as to why so many students are forced to take on student loans to cover the costs of their education. Without scholarships, free aid, or savings, how else do you pay for higher education?

After talking with a few experts on this subject, I now understand how lack of preparation is one of the major factors behind those numbers; however, I’m willing to bet it goes a little further than this. I’m betting that students are missing out on scholarships and alternative methods of paying for their education because of financial illiteracy. Let’s talk about this for a bit.

State of American Finances

According to this survey, 57% of US adults are financially illiterate. Couple that with the fact that the average American puts less than 5% of their disposable income aside for savings, it’s no wonder this country is bearing the burden of excessive debt. This is what children are witnessing in homes all over the country.

They are witnesses to parents who can barely pay the bills, parents who are not saving and who can barely tell you what compound interest is. But yet, parents are somehow expected to educate their kids about the high costs of education and how to properly finance their education? And, this study shows that increasingly parents are starting to carry the weight of student debt themselves. Parents can’t teach what they don’t know and their lack of knowledge in finances translates into their inability to guide their children in making smart decisions about financing college.

Generational Illiteracy

So how does this work? If parents aren’t teaching kids about personal finances, and neither are the schools, how in the heck are they supposed to know that they shouldn’t take out excessive amounts of loans during college? If we’re going to fix this student debt crisis, it’s common sense that we need to start with the basics.

Financial illiteracy can be passed down from one generation to the next. If someone doesn’t wise up and become knowledgeable about personal finances, the buck never stops. I come from a family who is financially illiterate and somehow I’ve beat the odds and I can pass this financial literacy test that only 57% of Americans can pass.

Student Loan Repayment Benefits Are Not Enough

Now that I know a little something about money and how important it is to stay out of debt, spend less than I earn, and save for retirement, I can teach my kids to do the same. If I’d known the things I’ve learned about money back when I was a high school senior heading to college, would I be $80,000 in student loan debt? If your answer is no, you’re one smart cookie!

Challenges to Overcome

I’m saying all of this because it’s time to face reality. We are facing a student debt crisis, but student loans aren’t really the problem. The problem is that we’ve become a right now society, instead of an in due time society. We overindulge in immediate gratification and fail to set our sights on achieving things with a long-term plan.

For starters, financial literacy should start at home, but since most parents lack money smarts themselves, we need advocates and educators to help provide everyone with a decent financial education. Once we’ve taught the basics, we need to emphasize savings over debt. It’s easy to get just about anything your heart desires with a line of store credit or a swipe of a credit card.

Banks and the Federal Government have made it just as easy to get a college degree with a payback plan without making sure the consumer is fully educated about student debt. Instead of turning to debt, students should be properly educated and fully equipped with the skills needed to obtain free aid for college.

More work study programs, more grants, more scholarships, and honestly — more work. In addition to college preparatory classes and college days across high schools in America, classes and work programs should be offered that will teach students how to save and work for their degree.

Students and their parents should start focusing on skills and requirements early that will give them a chance at landing high-paying scholarships and minimizing expensive private educational loan debt. The solutions are there, but we will only see them when we’re ready to stop misplacing the blame about student loan debt. The student loan crisis is a challenge, but I doubt it’s something that we can’t overcome by shifting the focus back to helping people become financially educated.