High School Seniors Remain in the Dark about Student Loans
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UPDATED: Apr 23, 2013
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Nearly half of high school seniors do not understand the cost of college, according to a recent survey.
The Credit Union National Association (CUNA) survey found that U.S. high school seniors lack the knowledge surrounding college costs and basic terms of student loans.
The poll of 847 high school students across the country was conducted online.
The survey found a disillusion among students: 70 percent are confident they will receive a high-paying job upon graduating. These students believe that high college costs will not affect their financial futures.
In reality, the unemployment rate currently stands at 7.7 percent. According to a 2013 study by the Center for College Affordability and Productivity, nearly half of college graduates were underemployed by holding low-paying and low-skilled jobs. This finding is contrary to the beliefs of high school students with plans to pursue higher education.
In addition, the survey found a staggering 83 percent of respondents did not know the interest rates, and 77 percent did not know the duration, of their expected or current student loans.
Paul Gentile, executive vice president of CUNA, told loans.org he was unhappy to find that future borrowers do not understand the terms of student loans.
Gentile said financial literacy should be taught more in schools and that the survey shows a lack of basic financial knowledge. He prefers student loans from credit unions that require repayment during college because it reminds students that they have a loan obligation. This form of lending, which focuses more on financial literacy, is a growing aspect of the market. Last year, credit union student lending increased 35 percent.
One positive finding from the study dealt with whether students knew that paying for college usually takes multiple sources. Seventy-four percent of respondents said they will need a combination of federal and private student loans, family assistance and jobs to pay for tuition costs. Only 5.8 percent expect to pay fully with federal grants and loans, and only two percent expect private student loans to fund their college education.
Gentile thought this aspect was surprising because “there was a recognition that they would need a number of sources to fund their education.”
Most students will need a mix in order to pay for their education, including a part-time job during college, parental assistance, grants and student loans.
Student loans, in comparison to other types of funding, are important for young adults because it is usually their first venture into the lending industry.
“They haven’t had much experience in the loan area,” Gentile said. “If they are going to get a loan, it’s the first loan they are going to get.”