High school seniors are slightly clueless about student loans. Nearly half don't know how much money they'll need for college and more don't understand basic loan terms, according to a new survey.
High school seniors are slightly clueless about student loans. Nearly half don’t know how much money they’ll need for college and more don’t understand basic loan terms, according to a new survey.
The nation’s mothers likely won’t be surprised. Out of 27 countries, American women had the lowest confidence in the ability of American teenagers to manage money.
The first annual High School Student Borrowing Survey from the Credit Union National Association (CUNA) revealed that 70% of students are confident they will receive a high-paying job. However, it was clear from the survey that they don’t understand how their finances will be affected by their student loans.
Three-quarters (77%) didn’t know the duration of their expected or existing college loans and 83% said they didn’t know the rates.
"These troubling findings suggest not just a lack of awareness of college cost or how debt works but also a lack of basic financial knowledge," Paul Gentile, CUNA executive vice president, strategic communications and engagement, said in a statement. "The results suggest that some students could be challenged in managing basic expenses or using such payment tools as credit cards in a consistently responsible manner as they enter adulthood."
Just 20% of the 17- to 18-year-olds surveyed said family will pay their college tuition outright while 74% will need a combination of federal and private loans, family money and jobs. Just 5.8% will use federal loans and grants alone and 2.01% will rely on private loans and grants.
While a quarter expect to take out at least two loans and 13% expect to take out one loan, a full 60% could not estimate how many loans they would need to pay for their college tuition. Of the respondents who know what they’ll owe after graduation, 15% said they will owe $10,000 or less; 22% will owe $11,000 to $50,000 and 13% will owe more than $50,000.
For most borrowers, loans are much larger these days, so CUNA is lobbying the government to allow student loans of longer duration than the current 15-year standard.
"The 15-year standard student loan made sense in years past when the total debt taken out was much lower," Gentile said. "College is a lifetime investment. The value of a longer term is you can better structure the loan to allow for smaller payments in the early work years. That is typically when most borrowers struggle as their careers are just beginning. Once their careers pick up, they are better able to manage the debt, so a longer term helps marry up those two realities."