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Most College Students Massively Fail When it Comes to Understanding their Student Loans

By on February 8, 2016

I’ve been helping people with financial problems since 1994. And in that time I’ve seen all sorts of suggestions to inoculate consumers from money problems. Most of the suggestions surround the need for kids to have more financial literacy education. Sounds logical, right?

But my mouth is hanging open as I read the latest college student survey from LendEDU.

The tragedy their survey exposes has nothing to do with students not having a financial literacy class. It seems to do more with a complete lack of caring about the entire student loan process, from start to finish.

When nearly three out of four students think Sallie Mae is a person and not a massive student loan company now known as Navient – I’m stunned.

How can you even begin to understand the basics and fine points of the student loan you just signed for when you don’t even know the name of the company that is holding or servicing your student loan? Yet 75 percent of students surveyed they know how interest rates work.

I stand behind my position that financial literacy classes are not an inoculation against money problems. Before any sort of class will be effective, you’ve got to give a damn about wanting to know more and understand your loans, and not just how interest rates work. It is doubtful any class is going to successfully teach someone to be engaged and care.

Here are more of the results from the LendEDU survey that will make a little bit of vomit appear in your mouth.

97.9 percent of students surveyed do not know which loans accumulate interest in-school or during deferment

93.9 percent of students surveyed don’t know their repayment terms

92.9 percent of students surveyed do not know the difference between subsidized and unsubsidized loans

92.1 percent of students surveyed don’t know their current interest rates

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75.9 percent of students surveyed with private student loans do not know the major differences between private and federal student loans

71.1 percent of students surveyed do not know the basic risks of a cosigner

58.1 percent of students are not sure or strongly disagree they will be able to fully pay off their student loans.

Now keep in mind, these are students who have already been through some sort of student loan introduction or counseling about student loans. And yet the students survey were totally clueless.

It is not wonder the numbers of people drowning in student loans is exploding, even as I write this.

About Steve Rhode

Steve Rhode is the Get Out of Debt Guy and has been helping good people with bad debt problems since 1994. You can learn more about Steve, here.

4 Comments

  1. Steve Rhode

    February 24, 2016 at 11:30 am

    The idea that classes will inoculate all students, massively fails to understand how much behavioral economics and personalities drives financial decision making.

    The greatest example is that while we say college students need more education about student loans, parents are cosigning these loans in waves. And you’d think they’d have the life experience to know better.

    • TVJ

      February 24, 2016 at 4:35 pm

      You’ve just helped me decide on the next topic: Student loans. My son already knows how to access the NSLDS system to see exactly how many loans he has and how much. This upcoming conversation will discuss the grace period, repayment plans, the dangers of deferments and the income-contingent payment plans.

      Since I’m still paying my own student loans, there’s no way I would have been able to take on PLUS loans. Besides, I need to continue working on my retirement goals.

  2. TVJ

    February 19, 2016 at 4:43 pm

    I have a coworker whose son is entering high school. One course he is required to take is a financial literacy course.

    My grown son is now finally getting his college education but naturally there were no financial literacy courses when he was in high school. I had to learn the hard way about finances as well. So now, using the topics on the curriculum for my coworker’s son’s course, I have started a “financial literacy course” for my own son. Actually it starts this week; I already sent him an article about Roth IRAs for us to discuss during our weekly Skype call.

    • Steve Rhode

      February 22, 2016 at 2:06 pm

      Interestingly, studies fail to show that financial literacy courses have much of an impact over math and reasoning. I always say, it’s like giving kids drivers education four years before they get in a car.

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