FACULTY OF ECONOMICS AND BUSINESS

DEPARTMENT OF ACCOUNTING AND FINANCE

GROUP ASSIGNMENT 2

EBQ2054
RESEARCH METHODOLOGY ECONOMICS & BUSINESS

LITERATURE REVIEW
(Title)
THE EFFECTS OF FINANCIAL DISTRESS AMONG UNIMAS STUDENTS

SUBMITTED BY:
No. Group Members Name Matric No.
1 CHRISTINUS NG KA HING 40922
2 DALJEET KAUR A/P GAG JIT SINGH 40983
3 MOHD SYAFIQ BIN WAHID 42285
4 NUR DJUITA BINTI JAMALUDDIN 43089
5 NURUL NATASYA BINTI AZLY 43603
6 SULAIMAN BIN MOHD FAISAL 44274

LECTURER : MADAM SALAWATI BINTI SAHARI

DATE : 10 APRIL 2017
Table of Contents

1.0 Introduction ................................................................................................................................... 2

2.0 Literature Review .......................................................................................................................... 3

2.1 Variables ....................................................................................................................................... 3

2.1.1 Unavoidable Expenses............................................................................................................ 3

2.1.2 Lifestyle ................................................................................................................................. 6

2.1.3 Peer pressure .......................................................................................................................... 9

2.1.4 Tuition Fees ......................................................................................................................... 11

2.1.5 Financial Planning and Awareness........................................................................................ 16

2.1.6 Debts.................................................................................................................................... 21

3.0 References ................................................................................................................................... 24

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1.0 Introduction

Financial stress is a widespread phenomenon in our society. Financial stress concerns with
anxiety, overdue bills, debt, interest rates, late fees and other financial hardships. Today majority
of people are stressed due to troubles connected with political instability, weak economy, lower
salaries, crisis on mortgage and loan market, rising prices of electricity, gas and life accessories.

Financial stress may be defined as the inability to meet ones financial obligations, which
can also include psychological or emotional effects (Northern et al., 2010). Much of the literature
on financial stress has focused on stress outcomes. Research has documented the following
negative outcomes of financial stress: (a) depression (Andrews & Wilding, 2004; Clark-Lempers,
Lempers, & Netusil, 1990), (b) anxiety (Andrews & Wilding, 2004), (c) poor academic
performance (Andrews & Wilding, 2004; Harding, 2011), (d) poor health (Northern et al., 2010),
and (e) difficulty persisting towards degree completion (Letkiewicz, in press; Joo, Durband, &
Grable, 2008; Robb, Moody, & Abdel-Ghany, 2011). Other research has focused on coping
behavior of financially-stressed students, such as seeking help (Britt et al., 2011; Lim, Heckman,
Letkiewicz, Fox, & Montalto, 2012).

Other than that, financial distress refers to stress that is caused by a financial situation
including personal, family and other various financial conditions (Joo, 1998). Delafrooz and Paim
(2011) expand this definition to include economic distress, difficulties, constraints and stress. All
these conditions are financial stressors as specified by Joo (1998) and Garman, Porter, and Mc
Million (1989). Contrary, financial distress may not necessarily be a negative issue. In fact, it may
become a source of motivation to increase productivity and income which can otherwise help
solve financial problems. Financial distress may rise due to increasing financial stressors.
Financial distress may be worsened if income earned is insufficient to make ends meet.
Furthermore, lack of knowledge and skills to manage personal finance will exacerbate the
stressor. When the stressors are beyond the control of the individual, the situation becomes critical
whereby he or she stops paying bills, receives notices of unpaid debts and calls from creditors and

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debt recovery agents. Subsequently, financial distress can also bring about impact to health,
functions and quality of marriage life and employee productivity (Garman, 1997).

2.0 Literature Review

2.1 Variables

2.1.1 Unavoidable Expenses

According to All Business (2012) unavoidable cost is that cost which cannot be avoidable
at least for the short term. This means that unavoidable cost can be said to be more or less a fixed
cost in the short term which cannot be changed. Hence, an unavoidable cost is an expenditure for
which there is a personal spending commitment in the short term. Because of the commitment, it
is not possible to sidestep the cost until the commitment period has ended. This type of cost does
not factor into short-term operational decisions. An example of an unavoidable cost is rent
payments under a long-term lease deal (Accounting tools, 2013).

Factor that contributes to the financial distress is unavoidable personal expenses. There
are three kinds of expenses: Fixed, Periodic and Variable. These categories can help the students
plan and track their expenditure, no matter how small or infrequent it is. The success of the
spending and savings plan depends on being thorough. According to Investopedia (2015), fixed
expenses occur every month and do not change much. For many students, these may be fixed
expenses: Rent, day care, savings, mobile reloads, internet, and foods & beverages. Periodic
expenses occur less frequently than once a month. For most students, these are usually periodic
expenses: Birthday gift, tuition, sports fees, and Internet subscription. Variable expenses change
from month to month. For many students these may be variable expenses: Meals out, medical
expenses, travel or vacation, groceries, academic books, laundry, entertainment, and
transportation.

These expenses directly affected the students financial especially in the personal utilities,
which some of the expenditures are unavoidable also known as fixed cost. As an example, day

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care, foods & beverages, academic books, transportation, the Internet and so on. The difficulties
indirectly lead the students having distress on the daily spending. Perhaps, the students personal
expenses greatly covered the daily usage throughout the semester, even the prices of the goods
and services are high, students somehow need to figure out the priority items to avoid any
nonessential transactions in daily spending either in short term or long term basis. Economic
instability, for instance, refers to a community or nation experiencing financial struggles due to
inflation, and rising prices. Unstable economic conditions have contributed to the social and
personal issues where university students are affected indirectly as well. Even though they are
shielded by the government funding or other financial aids, university students are inevitably
exposed to this distressful economic phenomenon. Giving their existing life and academic
demanding predicaments, university students now have to spend energy to cope with their
financial distress too.

The consequences of financial distress are the emotional and physical strain caused by the
pressure from the outside world which is uncontrollable. Stress reactions include inability to
concentrate, irritability, tension, and a variety of physical symptoms that include headache and a
fast. It also comes from any situation or thought that makes someone feel angry and frustrated.
Debts, unemployment, turnovers and economics inconsistency can lead to mixed feelings such as
fear, anxiety, anger and depression. These feelings are most harmful in the future without any
assistance could cause someone in dangers.

In an another study by Urbis, Vittles, Rintoul, Power and Keevy (2008), it was found that
students spent their income/loan on consumer goods such as food and beverages, clothing and
accessories, CDs, DVDs as well as computer games, and mobile phones which had been promoted
through advertisements on the radio, television and the Internet. Subsequently, the phenomenon of
uncontrolled spending among students may occur due to current technological developments and
changes as they tend to keep up with the current technology to obtain the latest sophisticated
gadgets such as smart phones, computer tabs, Mp3 player etc.

Besides, university life is about having fun and enjoying ourselves but is also very
important phase for the student because they receive higher education and practical training to
face the challenges in life. However, if the students is under high emotional stress they may face

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health problems, learning difficulties or career indecision. Stress is the primary factor that affects
the academic life of university students. While the prevalence of stress among university students
is less studied, but university life is full of stress. Some stressful events may seem obvious, such
as moving away from family and friends to attend university, new friendships, demanding
environment of higher education, peer pressure and financial concerns. Some of them also unable
to achieve more academically, but as one can manage other forms of stress, so financial stress can
also be manageable but first we should know it occurrence and magnitude so intend of present
study was to explore the phenomenon of financial problems and it impact on the university
students.

Hence, the knowledge in personal financial management is essential to help students to

make the right decisions about their financial situations. This is because they are faced with
challenges such as the need to have savings for emergencies, education, management of credit and
risks, plans for retirement and management of property. Situations as such can lead to emotional
stress. Financial stress can affect performance and motivation at work, as well as physical and
mental health leading to stress and further bring about negative impact to performance at the
workplace.

As financial concerns becomes one of the important stressors nowadays not only in
developing countries but people of developed countries such as America are also stressed due to
economic concerns. In this regard a study was conducted by American Psychological Association
in which the results shows that almost 50% American say that they more stressed about their
ability to provide basic needs to their families, moreover financial stress is considered a number
one cause of the stress. Some people live with it constantly while some live with it rarely during
some unexpected circumstance. One should not forget that financial stress needs to be addressed
in order for it to be manageable. It needs to be a pro-active interaction with the situation and one
needs to find ways for financial stress management to help handle the situation with a clear head.
One way to handle is just to define life goals and financial issues, also write the name of
significant people those can be helpful in this condition due to the increasing financial pressure
absorbed by the student, understanding how financial stress impacts their college/university
experiences is imperative.

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 Students from the low income families are facing difficulties in paying university dues,
buying papers for assignments, extra notes and buying text books are source of stress for them.
Moreover students from low income families cannot afford tuition fees, money for functions and
fines. Financially stressed students feel difficulties in buying new dress for function, canteen
expenses, transport expenses, buying stationary, expenses of cultural day, payment for one dish
parties. Most of the students agree that financial stress affect negatively on their academic
achievement. Financially stressed students feel hesitant to participate in co-curricular activities;
they ought to face the rejection of teachers as well as rejection of peer group due to their low
family income level. Consequently, financially stressed students feel inferiority complex, and
become socially isolated.

2.1.2 Lifestyle

What does it mean to say that one is financially literate? Mason and Wilson (2000)
defined financial literacy as a meaning-making process in which individuals use a combination
of skills, resources, and contextual knowledge to process information and make decisions with
knowledge of the financial consequences of that decision. Those who study financial literacy
generally agree that many, if not most, consumers lack the financial literacy necessary to make
important financial decisions in their own best interests (Perry 2008; Braunstein & Welch 2002).

In recent years, educators, policy makers, and university officials have focused on one
aspect of college students financial practices their use of credit, and most specifically credit
cards. Increased use of credit cards by college students has generated a concern among many that
credit card debt puts college students at greater risk for financial problems after graduation.
Numerous researchers have examined college students credit card use, finding in general that the
majority now have credit cards (Baum & OMalley, 2003).

According to a study conducted by the American Journal of Health promotion, more than
23% of students reported credit card debt of more than $1000. Using Poisson regression to predict
relative risks (RR) of health behaviours, debt of at least $1000 was associated with nearly every

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risk indicator tested, including overweight/obesity, insufficient physical activity, excess television
viewing infrequent breakfast consumption, fast food consumption, unhealthy weight control, body
dissatisfaction, binge drinking, substance use, and violence (Nelson, M. C., PhD, RD, Story, M.,
PhD, MPH, RD, & Echlinger, E., MD, MSPH, 2008). Financial institutions, the student loan
community, financial professionals and educators, and others have identified personal financial
management education as a priority.

Several studies showed that financial literacy is positively related to self-beneficial

financial behaviour. Hilgert, Hogarth, and Beverly (2003) added financial behaviour and financial
literacy questions to the nationwide Survey of Consumer Finances. They formed a Financial
Practices Index based upon behaviour in four variables: cash-flow management, credit
management, savings, and investment practices. Comparing the results of this index with scores
on the financial literacy quiz, they found that those who were more financially literate had higher
Financial Practices Index scores, indicating that financial knowledge is related to financial
behaviour.
Christine & Munro, argues that students are very poorly informed about both the costs and
benefits of higher education, and that financial outcomes are not created in an essentially private
and individual fashion, but instead are strongly mediated by cultural and familial resources.
According to the research conducted by Cude, Lawrence, Lyons, Metzger, LeJeune, Marks,
Machtmes, (2006)
The most significant influence on students money management behaviors was
their parents (70.0% reported parents together; 13.0% said mother, 6.0%, father).
Few students identified as their most important influence a brother/sister (1.2%),
grandparents (1.9%), other family relative (1.2%) or friend (1.5%). A small
percentage (5.2%) reported other, which included boyfriend, girlfriend, husband,
wife, teacher, self, personal experience, church, and classes.

Most students reported hearing various messages about money from various family
members. Common examples were, Dont spend money you dont have and various cautionary
statements about credit. Most of the messages students shared related to controlling spending and
avoiding or using credit wisely. In addition, many were very aware that they and a sibling
approached financial management differently and wanted to be different from or like their sibling,

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depending on whether the sibling was more or less responsible. Moreover, a number of students
reported that they knew what their parents expected of them and they also knew they werent
meeting their parents expectations. Some students explained that they have less money in college
than ever before. In high school, they had jobs and more generous allowances from their parents
and fewer expenses. A few students said they werent managing their finances as responsibly as
they might, because their parents behaviours allowed them to continue to rely on them (Cude,
Lawrence, Lyons, Metzger, LeJeune, Marks, Machtmes, 2006).

Lyons (2003, 2004) examined the credit card practices of college students using four
different definitions of financial risk: $1,000 or more in credit card debt, delinquent in credit card
payments by two months or more, had reached credit card limit on at least one card, and paid
credit card balances in full only some of the time or never. Across the four definitions, she found
that gender, ethnicity, being financially independent, owing $1,000 or more in other debt, and
acquiring credit cards prior to or during the first year in college were just a few of the variables
that significantly determined a students level of financial risk.

Research has shown that adult behaviour, including financial behaviour, is learned through
socialization. Social learning and consumer socialization experienced by children brought up in
different cultures can be expected to be different; therefore, it shapes the childrens beliefs and
behaviour differently. Moschis (1985) concluded that parents may be instrumental in teaching
general, as well as specific, rational orientation regarding consumption. Parents may also
emphasize normative consumer skills while interacting with their children.
Friese and Koenig (1993) found a positive relationship between variables of family discord
and compulsive and impulsive buying behaviours. Respondents in their study were using buying
to escape from problems and to achieve positive feelings about themselves. Hira (1997) supported
this finding indicating that compulsive behaviour is associated with unpleasant childhood
experiences such as divorce, death, withdrawal of love, suppression of expressed feeling, high
expectation, and punishment. Family background definitely has an impact on the lives of
compulsive spenders. Financial behavior of college students is learned through the socialization
process. What the adolescent observes and learns during childhood influences how he or she will
behave as an adult. Data indicates that the greater the level of parental addictive behaviours, the
higher the subjects levels of compulsive behaviour (Friese and Koenig, 1993).

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 However, not much research has been conducted on the type of lifestyle a student chooses
to have and the financial distress caused by it. This research focuses on finding the core causes of
financial distress among university students and one of it being their lifestyle.

2.1.3 Peer pressure

Peer pressure may be addressed as a type of social influence that brings great effects to the
decision making of a person. As peer pressure comes in with both positive and negative impacts, it
comes down to the students who are handling the situation to judge whether it is better to go with
the flow or turn their back for good. According to Xu et al., (2015), young adults who are an
extrovert have lesser tendency to experience financial distress rather than those who are more
open to their surroundings. Therefore, when students are exposed to peers who spend a lot, they
tend to be influenced by that particular peers spending behaviour as well. This fact is supported
in the study of Salazar et al. (2013) which says that consumers do not make their decision
independently and their behaviour is shaped by the social groups which they belong to. In this
article, Salazar et al made it clear that people in a certain social group tend to shop as how the
peers in their social group do. Although some spending behaviour might lead the students to have
better personalities and experience new things, the aftermath of spending behaviour that is beyond
affordable for the students itself is worrying. Students might overspend the money in the
beginning of the semester and end up being in financial distress situation at the end of the
semester when final examination is just around the corner. Not to mention how that will affect
their concentration towards the exam amidst all the distress. It is indeed a matter to be concerned
by the students.

In another study by Schbel et al. (2016), it was also found that individuals often ignore
their own honest opinion in making decisions in favour of the opinion of people they seek help to
or advices from their peers. This is similar to the finding mentioned previously in the study of
Salazar et al. (2013). In the study of Schbel et al. (2016), the authors mentioned that some people
successively make decisions and have the potential to influence others. As an illustration, a person
who have bought a Porsche and is satisfied with the car will influence his peers to buy the same

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car brand and his peers have the tendency to buy the same brand because of the trust in the
decision made by the person and the fear of risking anything if they buy from another brand that is
not familiar, even if it seems way better than Porsche. This conformity behaviour, however, may
only be applied to a person who are making decision and is influenced by peers whom they trust
or they look up to. Hence, it is also important to acknowledge the perception of a person towards
their peers who previously made a similar decision.

Perhaps for some students who are fortunate enough, their financial distress is always
solved by means of their family members who give extra allowances, pocket money, and food
supplies every time they are in hard times. Of course, it is true that no parents would want to see
their child suffer in financial distress especially during their studies but as a matter of fact, not all
parents are able to provide enough financial aid and other supplies to their children as much as the
childrens need. Frequently, students from middle and lower income family face financial distress
situation without getting enough aid from their family and relatives. As they spend beyond their
means because of peers influence, the solution of their problems is not as cool as they thought it
would be. This could be seen in the study of Archuleta et al. (2013) which explained that students
who come from lower and middle income family have greater tendency to graduate and start their
working life with loans twice as much as students from the higher income family. Students
encounter a series of complex decisions when it comes to financial situation. This is because most
of them need to manage the fund of their scholarships or loans for their studies and their personal
expenses as well. Often times, students are weighted heavily with credit cards as to fulfil their
desire for trends and to accommodate their life needs. Undoubtedly, this is one of the reasons why
students need to be enlightened on the importance of understanding financial management and
having the capability to manage their own desire and making decisions for the betterment of
themselves.

Provided that peer pressure is one of the main causes for students financial distress, it is
important to look through another aspect within this context which is smartphone addiction.
Generally speaking, most university students are from generation Y, which is very popular as a
generation that is technologically driven. In a study by Aljomaa et al. (2016), bachelor degree
students were found to have the highest level of addiction to smartphones. This addiction will not
emerge if it was not for the users of the smartphones themselves, which are the students.

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Smartphones nowadays are not cheap and the high end brand such as Apple, Samsung and other
emerging Android brands cost as much as the students whole semester tuition fees if not more. It
is also mentioned in the study that there is an increase in the number of smartphone users
spending considerable sums of money in order to own the latest version of those gadgets, software
and even applications. As a matter of fact, in order to follow their peers trend, students are
willing to spend beyond means just to prove that they are among those who are in trend.

In addition to the smartphone addiction, another cause has been found in a study by
Bilgihan et al. (2014), that add up to the smartphone addiction which is seeking and sharing
behaviour in Social Networking Sites (SNS). Young adults and SNS in the modern era can be said
as inseparable because the amount of SNS users who are in between 20-30 years old outnumbered
almost every other age range. Also, the heavy users of SNS are mostly young adults within that
range, according to Bilgihan et al. (2014). In brief, students are most likely influenced by the
smartphone addiction through their peers in SNS either by them posting pictures or simply posting
updates of what they are doing with their new smartphones. Live update in this era has never been
any easier with the existence of these social networking sites. People are free to update anything
and everything they are doing to show to the world. Hence, students who are exposed to these
social networking sites (SNS) have higher tendency to spend more on smartphones and the
upgrades simply to be in the trend. The finding in Bilgihan et al. (2014) study is supported in the
study of Aljomaa et al. (2016) which said that users of the smartphones, in this particular case;
students, have been so attached to their smartphone that they feel they can hardly even function
without the existence of such gadget. Moreover, the students are highly dependent on their
smartphones and have resulted in the neglect of assignment and tasks. As had been said, the heavy
users of SNS are young adults, which explain where all the time that was supposed to be spent on
their studies had gone to.

2.1.4 Tuition Fees

A potential source of financial stress for college students is the cost of tuition and fees,
which has grown at 3 times the rate of inflation (Britt, 2016). It is to say that students would have

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to work year-round at 55 hours each week to pay for the average public college tuition fees. The
term university college is used to for those tertiary level education institutions that can confer
their own degrees but have not achieved university status. Cambridge Dictionary defines tuition
fees as the money that a student pays to a university for their teaching. Likewise, The Free
Dictionary describes tuition fees as a fee paid for instruction (especially for higher education).
Tuition fees generally refers to a mandatory charge levied upon students covering some portion of
the general underlying costs of instruction (Amir, 2005). According to Johnstone and Marcucci
(2007) there is a non-instructional fee which refers to a charge levied to recover all or most of the
expenses associated with a particular institution provided good or service that is frequently
partaken by some but not all students, such as the costs of food and lodging, or of health and
transportation services, and which might, in other circumstances, be privately provided. Although
the published tuition fee is the same for every student in an institution, the net tuition (fees after
factoring in financial aid) however is very different (Robert, 2006).

The rises in tuition fee are caused by the commercialization of higher education (Stewart,
2015). Competition for fee-paying students has been one prominent way in which higher
education institutions (HEIs) compete for additional income (Brown, 2010). A HEIs net tuition
revenue is the income generates from tuition fees that can use to support its operations (Brendan,
2015). It comprises of the total amount of money a HEI collects in study fees, minus any
scholarships, grants, tuition discounts, or stipends an HEI offers to students. As for that, tuition
fees have been rising in higher education systems around the world. The cases are very different
and have dissimilar outcomes. In the United States, public HEIs have increased fees without
explicit changes in government policy designed to increase fees. In the United Kingdom,
increment of fees reflect explicit government policy. In both cases, fees have been charged in
order to share the cost of providing higher education between the state and the students (and their
families) who consume education (Johnstone, 2004; Johnstone & Marcucci, 2010). In Beijing, rise
of tuition fees charged have opposing views from parents and academicians (Xiaoping, 2002).
Parents fear that the rising education costs will deter higher education opportunities for their
children, whereas the academicians support the increase in tuition fees because they often benefit
from these increases indirectly through higher salaries. In Malaysia, a number of factors are
responsible for the high demand for higher education that operates both at personal and societal
levels. At the personal level, higher education institutions are considered to be the key to

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obtaining jobs that pay good salaries, confer social status and prestige, and provide avenues for
social mobility. At the societal level, the Malaysian government is using higher education
programmes to restructure Malaysian society to have a more indigenous population pursuing
higher education, thus, enabling them to improve their livelihood later in life (Mohamad, 2003).

In some countries such as Denmark, Germany and Sweden, there is non-existence of

tuition fees. However even when there are no fees policy for national student in certain countries,
Sweden for instance, insist on charging fees for international undergraduate students (Brendan,
2015). They consider overseas or international students as part of their core business, and have
been especially attractive as a source of revenue. Thus, it leads to acceptance of large numbers of
overseas students from all countries (Brown and Carasso, 2013). International students were
enrolled in all institutional types but these students tended to congregate in large and well-known
universities. Six of the top ten institutions in terms of international student enrollments were large
public research universities (Brendan, 2015). Although rationales for attracting more international
students vary, the potential for economic gain is a common. At the end of the day, it all comes
down to different concepts of tuition fee policies in higher education sectors either locally or
internationally. Some argue that university education is a basic right and should be free of
charge. Universities should be accessible to all with sufficient academic capabilities. But this does
not imply that higher education should be free of charge, neither does it imply that all should pay
the same price, or should have education of the same quality (Jacobs, 2006). However, the impact
of increasing educational fees with regards to higher education accessibility and social justice
have raised concern (Johnstone and Marcucci, 2007), and for that reason, the price setting needs to
be done wisely and be justifiable.

There are several examples in education literature that discuss education phenomena using
market theory where students are considered customers. Conway (1994) defines the customers as
the students (with courses as the higher education products) and industry (with students as the
products). Watjatrakul (2014) also refers to students as customers in higher education, and argues
that they are the service receivers who have the right to experience good service quality. The
higher education market competes by selling highly differentiated products in terms of quality,
major offerings, location, sports teams, etc (Robert, 2006). As a result, the institutions are price
searchers and have the ability to increase tuition fee without losing all customer. Standard theory

13
of price discrimination suggests that the price will be lower for the group of consumers with the
highest price elasticity. Winston and Zimmerman (2000), who investigated the price competition
among post-secondary institutions, found institutions with lower tuition prices were considered
wealthier colleges and may have an advantage in luring low-income student enrollment over
institutions with fewer resources. The market theory employed herein suggests that all else being
equal, cost (as impacted by institutional wealth to subsidize students) will be a deciding factor.
However, a few literatures consider the image and reputation of HEIs as an important element of
competitiveness in the market according to which students are willing to invest their future even
with declining financial support.

Baumols cost disease theory discusses that universities should rely more on private
funding. Higher education is intrinsically labour intensive and has little scope for technological
progress. Teaching and research need to be done by highly qualified people who cannot be
replaced by technology. Productivity growth in universities inevitably lags, so the cost and price
of university education rise over time (Baumol, 1967). Provided the opportunity costs of study do
not increase as much as tuition fees, Baumols cost disease expands the university sector. Hence,
despite rising relative prices, the budget share of higher education rises over time.

Human capital theory, launched in the 1960s, replaced manpower planning approaches to
higher education. In this economic perspective on education and labour, higher education is
something that states, parents and students invest in for the sake of a return. Logically and
empirically the case for cost sharing is compelling. Tuition fees backed by an income-contingent
loan scheme will deliver an internally efficient and equitable outcome if higher education is
understood as a contract between the institution, student and government. The negotiation of
tuition fees and their payment should be left to the institution and student. Government must only
regulate that students have access to income-contingent loan schemes that cover out-of-pocket
costs fully and that payment is collected through the tax office. What will then emerge is not a
market for higher education, but a market for education loans among lending institutions a
market regulated to provide default protection and consumption smoothing for students
(Armbruster, 2008).

A large body of work regarding enrollment responsiveness suggests that increases in cost
negatively impact enrollment decisions (Kane, 1995; Leslie & Brinkman, 1987). 25 quantitative

14
studies found evidence that tuition fee increases resulted in declines in the college participation
rate of approximately 0.75% per $100 tuition fee increase (Leslie and Brinkman, 1987). It can be
said that stress is significant for students studying in a higher education institution. Andrews and
Wilding (2004) found that 9% of students with no symptoms of depression prior to university had
become clinically depressed halfway through their degree. A study at a London university found a
significant relationship between financial problems and mental health (Roberts, 1999). According
to Joo, Durband, and Grable (2008), financial concerns are a primary stressor for college students,
particularly freshmen. There is evidence that some students experience significant levels of stress
(Brown,1999). Specifically, increasing tuition fees and living expenses are notable areas of
concern (Chen, 1999). Stress has been defined as a transaction between a person and their
environment (Galvin, 2015). It is argued that stress is the result of an individuals perceptions that
they do not have the resources to cope with a perceived situation from the past, present or future
(Lazarus, 1984). However, differences between individuals mean a situation regarded as stressful
by one individual, may not be stressful for another (Omura, 2007). A 2008 study by Perna found
that students from mid- and low-resource schools had deep concerns about borrowing to pay for
school, seeing school loans as debt rather than an investment in future earnings. These findings
were consistent with those by Callendar and Jackson (2008) who found British students avoided
college debt by selecting colleges close to home and in low cost of living areas as well as
locations that offer employment opportunities. A 2013 study by Bradley also found that tuition
fees reformation did increase the risk of dropping out of a university by two groups of students
which have been referred as switchers and stop outs.

Economists and educational analysts agree that the cause of the faster-than-inflation tuition
rises is the commercialization of higher education (Bok, 2003). The views on rise tuition fees
charged by most colleges and universities hold different perspectives from students, parents,
academicians, the institution and government itself. Most research found that tuition fees are
significantly related to the respective countrys higher education institution policies. According to
Alberti-Alhtaybat (2017), tuition fee policies have differing success and failure rates due to the
respective countrys political system and approach to public sector reform. The United Kingdom
is historically independent from government and only linked through funding arrangements
(Budd, 2016), while the German sector is directly governed by the federal states government and
thus fully dependent on the Laender policy. No doubt that overall expansion of international

15
student mobility was one possible explanation. Another plausible explanation was that
international undergraduate students were sought by HEIs because they yielded income from
tuition fees. As public HEIs became more dependent on tuition revenues, they have turned to full-
fee paying students to generate revenue. Undergraduate students have been attractive targets in the
pursuit of tuition revenue because they nearly all pay tuition. Hence, public HEIs in the US may
have sought to enroll additional international undergraduate students in order to generate
additional revenue. It is also proved by research that students experienced significant levels of
stress due to financial issues. With changes to the system of financing higher education in the UK,
particularly the introduction of fees, there is also a need to monitor the effect of this change on
levels of student stress.

I agree with opinion made by Renehan (2015) where he is partial to the economist
viewpoint. When presented with the visual data comparing average additional lifetime earnings
with a college degree to the average net cost of college it becomes clear that high tuition fees are
not necessarily a problem. Economically, it is definitely worth it to attend college. Student loans
are a burden, but compared to the alternative it is impossible to say they are not worth it.
Furthermore, even if average tuition doubles what it is now, it is still an economically sound
investment it to attend college and pay for it completely with student loans. However, our society
should continuously look for more efficient ways to operate. Online school has the potential to
sever college costs while providing a quality education. Our society should not dismiss the
potential of online schools because those that exist currently are not reputable. We should invest
in new ways of teaching and learning online which can make education cheaper and more
accessible.

2.1.5 Financial Planning and Awareness

Money is an asset that plays an important role in our daily lives, especially in the current
economic uncertainty. This is because whenever we are, we need money. Without money, many
necessities of life cannot be fulfilled. There is a saying that money is not everything, but the
current reality of life is now almost all the affairs of life requires money. It is not only important to

16
those who are already working but its also important to the students attending a school or
university. Hence, because money is important in life, it must be managed properly to improve the
quality of life. The failure of the students to realize the importance of effective financial
management will cause them to be plagued with negative mental health, (Roberts & Golding,
1999) identified a link between adverse financial situations of college students and the negative
impact on mental and physical health.

When we have money, we are given three options of whether to spend it all, spend half
and save, or save and invest. It means we must always think how we can get financial assistance
in a good way. For students who are good at managing finances, are encouraged to spend half and
half again as a reserve. But it is worth considering when shopping either by needs or wants. The
need here to mean a matter of principle that must be acquired, possessed and used in a persons
life such as clothing, food and shelter, while the wants is persons desire for luxury cars.
Nevertheless, every problem will be lightweight and easily and be able to save money if we
succeed in distinguishing desire from need to implement the demands of our daily expenses.

Financial management and awareness among students especially should be inculcated

since elementary school, this is to enable them to manage their own finances more wisely and will
not face the problem of having insufficient funds at the end of the semester and the financial stress
will affect the performance of the student. According to (Wilding & M., 2004) found that
financial stressors were positively associated with increased anxiety and depression levels among
college students in the United Kingdom. Financial stress has also been linked to academic
performance (Bennett, McCarty, & Carter, 2015).

Financial planning of each individual cannot be taken easy because the future challenges
of life is becoming increasingly difficult. Each student must be aware and wise in planning and
managing their financial expenses. In fact, the Bank Negara also focuses in financial planning
which is financial planning started when someone planned daily expenses. Bank Negara gave a
few pointers that can help students in their financial planning. This is because almost every
students who gets the money especially students who are under scholarships are given a lump-sum
of money for the whole semester does not know how to spend the money properly. The tips are
spending plan well, spend wisely where the needs come first, make sure always have money on

17
hand, keep money in a safe place and invest the money to get a return. These tips proved to be
very useful for students in school, university or other individuals.

Be mature and visionary to achieve ambitions. Financial problems are not the cause of the
students do not want to continue their studies at university, many ways and opportunities to get
the financial resources. Students who considered leaving their academic programs prior to
finishing due to financial strain reported poorer psychological health (Archuleta, Dale, & Spann,
2013). The cost of education in terms of fees, academic books and materials assignment are
increasing. During his school days reference books and textbooks can be easily obtained because
of the text book assistance program for families of students who are less fortunate. It is far
different from the books in the flow of higher studies because the majority of reference books are
more expensive and scarce. Furthermore, expenses for the purchase of academic books are quite
difficult to be estimated compared to the actual cost which can only be determined when the study
starts, and everything depends on the lecturer or tutor each subject.

Although, the library is a place for us to get a reference book, but it is limited in terms of
the number of books and the lending period. This makes it difficult for students to deal more so if
they are away. However, the problems often arise due to students not being able to control
spending habits in a rational and well-versed in identifying the needs and wants. This resulted in a
lack of money in each of their spending if they are not awareness about financial planning during
study. While admission student money is limited either from student loan, scholarships or parents
fund but money outflow of students increasing day by day. This situation will lead to problems in
the financial impact on students and their academic achievement. Financial knowledge should be
emphasized among students, it is as if the student has a basic financial knowledge or specific areas
of financial knowledge he can be predictor of debt and overall financial well-being. According to
a study suggested that college students have relatively low levels of financial knowledge (Sharpe
& L., 2009).

Therefore, the government allocated money for education so that there was no financial
crisis among students and ease the daily expenditures. In the 2017 national budget presented by
YAB Dato Sri Mohd Najib Tun Abdul Razak, Prime Minister and Minister of Finance on
October 21, 2016, he allocated RM325 million to about 1.3 million students by providing a
student debit card replacing the book voucher amounted RM250 to all Malaysian students in

18
public universities and private local, matriculation and Form six students across the country. In
this case, financial planning and awareness is an important aspect that should be adopted for the
future of the students themselves because of financial planning will promise a prosperous life.

But it a different scenario if the student is already married, financial planning is very
crucial on arranging family expenses and education. Awareness of financial planning must be
instilled prior to getting married, otherwise the student will experience serious financial problems.
Furthermore, families spending more than the students who were single. Marital status was also
found to be a factor in financial practices such as having a written budget, keeping bills and
receipts, planning spending, shopping with a list, and saving regularly (Hayhoe, Leanch, Turner,
Bruin, & Lawrence, 2000). It does not matter whether the student is married or not, but the
majority of students in institutions of higher education (IPT), the average received aid in form of
scholarships or loans from either the Higher Education Fund Corporation (PTPTN), Public
Service Department (JPA), Ministry of Education (MOE), Majlis Amanah Rakyat (MARA), the
foundation of the State and private companies.

Government financing of high education level students have undergone significant

changes since the last ten years, in which state aid in the form of scholarships reduced and
replaced by student loans program. What is certain is loans and scholarships to cover tuition fees,
accommodation and living expenses of students at the university. Students do not have much
choice not to take student loans because of scholarships granted are decreasing year by year and it
is definitely harder to get with the high requirement needed. If the students are already making
savings itself the result of a side job done or other financial resources, this student would already
have a level of awareness of the important of financial planning when pursuing leter. They
certainly can discern the needs and wants at the same time. Yet the demand for university
education rises, including direct costs such as tuition costs, as well as the indirect costs of
education, including books, room and board and fees, with increased cost, saving of students and
their parent might less sufficient to meet this financial obligation (Razaki, Koprowski, & Linberg,
2014). Consequences, more and more students have turned to greater and greater amounts of
student loans.

In order to ensure their money is enough to survive for the whole semester part time work
is no longer a big matter in life as a student, but it is one of the steps taken to accommodate

19
students in financing their college expenses. They not only expect a loan or scholarship obtained
exclusively. Practice thrift able to manage their finances well. In Isla also focused on thrift and
moderation in life. With this we can plan and manage spending the loan money in the most
prudent. Students are encouraged to learn the value of money loans. Although the money was not
from the pockets of parents, student should appreciate it because the money is mandated by
government to achieve our ambition to further serve the religion, society and the country.

Moreover, awareness of the important of efficient financial planning have grown and
improved in every student. Knowledge of basic accounting and financial management skills are
very important especially in the current atmosphere of increasingly challenging conditions. When
students are aware of it, then naturally the students will always try to correct the weaknesses that
exist, are willing to be guided and commitment to practices that can help improve the performance
of their personel finances towards a more systematic and making prudent spending. To create
knowledge about finances should be made as formal education so that students can be made aware
of the initial resistance and how to handle it. However, because of poor results, researcher and
policymakers have started questioning the roles parents and personel experience play in effective
financial knowledge teaching (Tang & Peter, 2015). For example, students can successfully obtain
necessary financial concepts by participating in programs that provided education as well as
hands-on investment and management experience.

Although the issue of financial planning has long given attention and financial
management education has also increasingly emphasized in the early stages of schooling and
university, bankruptcies among youth is can no longer be prevented. As a result, the quality of
financial management education is one aspect that should considered to determine the level of
financial literacy are said to be the cause of the bankruptcy case. Quality education is something
that is important and it is the responsibility of all parties in sight. To ensure the quality of students,
each of the input and the process of delivering educations should be quality too. Quality education
will produce graduates who are well educated and of high quality and in turn will help reduce the
burden on the country and improve economy. Students who are not satisfied with the quality of
financial management education are likely to have a low level of financial literacy because they
basically do not get the education that is offered.

20
 According to a study (Pintye & Kriss, 2016) shown that financial behavior is perhaps the
most important element of financial literacy, as it determines the individuals financial well-being.
Financial planning and awareness also plays an important role in the context of life, organization
or business. There are several benefits that would be obtained if the person is conscious and able
to plan and manage its finances well. For example, that person will be able to better manage debt
and avoid dependence on others. Financial literacy is one of the instruments that can be measured
to assess the financial management skills among university students. The majority of university
students will be away from their families, so they have to make plans and decisions to save, spend
or investment based on financial knowledge that they have. Therefore, by studying the level of
financial literacy among students, we will have a better understanding of the practice and the level
of their awareness of financial planning.

In other words, financial management and awareness of the students should be given more
attention so that students will not have problems in the financial difficulties that can interfere with
the performance and the negative social problems. Parents and educators need to collaborate in
order to provide education on the importance of financial planning knowledge to them. For
parents to see their kids manage their finances wisely and efficiently when away from them they
should begin at home such as teach children to manage money from a young age. It can be
controlled from happening if the students are more disciplined and consistent in managing money.
Whereas, as a student, they have to learn the technique of efficient financial management and
systematically, so they do not experience severe financial crisis in education. Students also can
take the necessary steps with the situation and problems faced in life on campus.

2.1.6 Debts

In routine daily life, money is something very important thing crash and have a major role
in our livelihoods. As we see, now the economy is not so stable. When the economy is not stable,
it give the effect to our everyday life because whenever we are, we need money. Without money,
it very diffcult to buy basic necessity and goods elections cannot be free life needs are met with
the perfect and complete. Accidents of this sort of thing is not only important to the people who

21
already working and it also applies to the students of the university. Therefore, money is an
important source in the daily life and keep in governance with good quality to improve finance so
that it does not disturb the mental health a student finance by itself. When an accident of this sort
of continuous, financial pressure financial terms of mental health aspects. According to Grable &
Joo, (2006); Joo, Grable, and Bagwell, (2003); Norvilitis et al., (2006); Perna (2008) found that
financial stress and anxiety can also be seen as the financial aspects of mental health. Although
rare, research has linked financial stress and worries with debt college student. The study
describes the existing literature related to student mental health budget. More specifically, the
purpose of this study was to explore the association of student financial concerns, especially the
impact of the debt.
Students universities are going to start feeling the burden when students have debt in their daily
lives immediately after they graduate to the lending institutions. Debt can put pressure on the
emotional, mental and physical. The case studies can lead to a student being distracted and can
cause them to commute too academic. According to Andrews and Wilding (2004) found that the
positive pressure is associated with increased anxiety and depression levels among college
students in the United Kingdom. financial stress have also been associated with academic
performance (Joo, Durband, and Grable, 2008).

Furthermore, according to Roberts, Golding, Towell, and Weinreb, (1999) found that the
research conducted by British university students have shown poor mental health status related to
financial stress such as having difficulty paying bills on time. Thus, according to the study
Drentea, (2000); Jenkins et al, (2008); Roberts et al., (1999) have shown that a simple relationship
between debt and mental health problems such as anxiety and depression. Furthermore, the debt
has been associated with a decreased sense of financial well-being and higher levels of stress
reported overall (Norvilitis et.al, 2006).

Sometimes students take an easy way to ensure they do not experience financial pressures
that take credit cards because when students have credit cards, student forgets his impression to
anyone who takes it. According to Goetz, Cude, Nielsen, Chatterjee, & Mimura, (2011) found that
college or university students face a series of complex financial decisions as they decide how to
finance their college or university education. Student loans and credit cards have become two
major types of debt are receiving attention in the scientific literature related to college students.

22
 According to College Board (2011), the costs continue to outpace inflation further studies
published from 2011 to 2012 with the total cost of tuition fees and room and board for an average
of $ 17,131 for a public institution in the state and $ 28,500 for private colleges and universities.
The project on student debt (2011) estimates that two-thirds of college seniors from the Class of
2010 graduating with student loan debt had an average debt load of more than $ 25,000.

According to the study Henry, Weber and Yarbrough (2001) states that students on the
brink of financial disaster due to credit card debt and poor financial management behaviors such
as lack of budget. At the same time, the impact on students who take credit cards have positive
and negative effects that enable them to manage their debt better. According to Joo, Grable and
Bagwell (2003) confirms Henry et al. (2001) assertion and found that credit card debt is
attributable to the positive financial behavior that is negative and financial stress. In addition, they
found that the majority of students thought it acceptable to borrow money to pay tuition costs
related items, diseases and living expenses.

Therefore, researchers have released a number of perspective to resolve the issue of who
can put pressure on the student. Students can develop a sense of responsibility when borrow
money and manage money is a loan to a more advantageous. According to the study Bodvarsson
and Walker (2004), college students can embrace a greater sense of responsibility when they last
debt. They can spend more time on academics, work or other activities in order to obtain gainful
employment upon graduation.

In other words, the loan debt should be given more attention so that students will not have
a problem that can give them the financial stress that can cause disruption of the academic
performance and social problems in the negative direction. As a measure, the role of parents and
educators need to cooperate in resolving the debt issue. At the same time, our main concern the
importance of knowledge in managing the finances so that debt that they owe not to the negative
direction. If students make positive steps, financial problems will reduce the stress faced by the
students.

23
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