A surprising number of college freshmen are ignorant when it comes to the amount of student loan debt they’re taking on to cover their college costs.
Just how clueless are these students? According to a new report from the Brookings Institution, 28 percent of college freshmen with federal student loans who were surveyed in a national sampling had no idea they’d taken out federal student loans, and 14 percent wrongly reported not having any debt at all.
While fewer than 1 in 4 first-year students correctly estimated their debt within 10 percent of its actual value, a majority (51 percent) underestimated their debt burden by more than that, and 25 percent overestimated it.
Many are also unaware of what they’re paying for school. Based on another survey, the report said:
We find that only a bare majority of respondents (52 percent) at a selective public university were able to correctly identify (within a $5,000 range) what they paid for their first year of college. The remaining students underestimate (25 percent), overestimate (17 percent), or say they don’t know (7 percent).
It goes without saying that it’s important that students understand their loan debt as well as the cost of their education. “The problem with the lack of financial savvy among enrolled college students is that the consequences of their decisions come as a surprise to them once it’s too late,” the report said. It went on to explain:
College students need to continue to bear in mind the cost of their education, and the loan payments they will have to make after graduation, as they plan for their futures. This knowledge is critical as they make important decisions such as what field to major in, how much to work while in school, how many credits to take each semester, and what kinds of jobs to pursue after graduation.
If you would have asked me about my student loan debt while I was attending college, I would likely have been as clueless as these students. I knew I had the “bad loans” (unsubsidized) that started accruing interest while I was in school, but that’s about it. I had a basic understanding about how many loans I had taken out, but I didn’t think twice about how I would pay them off after college, how much my monthly payment would be or how long I’d be burdened by the debt.
I think a counseling session with a real, meaningful discussion each time a student takes out a loan could be beneficial. Students need to get a handle on their student loan debt in college so they’re not caught off guard once they’re done with school and faced with bills for the loans.
Are you surprised that so many students are ignorant about the amount of student debt they’ve elected to shoulder? Share your thoughts below or on our Facebook page. And for more about dealing with student loan debt, watch this video from Money Talks News’ Stacy Johnson, then check out Finding Help With Your Student Loans.