Nearly 50% of high school seniors in the U.S. can’t even guess how much money they will need to pay for college, and even greater numbers appear unable to understand the basic terms of a student loan, according to CUNA’s first annual High School Student Borrowing Survey.
The CUNA survey also found that 70% of students are confident they will receive a high-paying job upon graduation, suggesting that students are willing to pay the cost of college tuition even while not understanding how their associated borrowing will affect their financial futures.
The Student Borrowing Survey polled 847 high school students nationally (ages 17 to 18) about their strategies for paying for college. Of those surveyed, a large majority knew neither the rates (83%) nor the duration (77%) of their expected or existing college loans.
The poll was conducted by CUNA in conjunction with Financial Literacy Month, which is observed each April.
“These troubling findings suggest not just a lack of awareness of college costs or how debt works, but also a lack of basic financial knowledge,” says Paul Gentile, executive vice president for CUNA. “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.”
Gentile added that even if students relied on their parents to arrange financing, it’s still important for students to have a basic understanding of the level and type of college debt they are taking on.
He noted that the survey’s findings are also of particular concern because 74% of aspiring college attendees say they will need a combination of federal and private loans, family money and jobs to support their tuition.
Only 20% of respondents reported that family will pay their tuition outright and even smaller percentages expected to get by with federal loans and grants alone (5.8%) or private loans and grants (2%).
Nearly twice as many respondents (25%) anticipate taking out two or more student loans rather than a single loan (13%), while the majority (60%) reported that they didn’t know how many loans they would need to graduate.
It’s time to extend student loan terms
Given the new reality of more loans at larger amounts for most borrowers, CUNA is lobbying the government to allow student loans of longer duration than the current standard, which is 15 years.
“The 15-year standard student loan made sense in years past when the total debt taken out was much lower,” Gentile says. “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.”
Of the respondents who do have an idea of how much money they will owe when they graduate, 22% say they will owe $11,000 to $50,000. Fifteen-percent expect debt of $10,000 or less, and 13% of respondents expect to have more than $50,000 in debt at graduation.
One-third of the respondents (33%) reported family income of less than $25,000; 11%, less than $50,000; 19.5%, less than $100,000; 15.5%, less than $150,000; and 21%, more than $150,000.
Sixty-six percent of respondents were % female, mirroring the gender gap in college applications.
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