Several recent reports highlight some startling facts about college students and loan debt. It seems that students, while worried about the idea of debt are not particularly well-educated when it comes to managing their finances or understanding how credit and debt works. Then, once they graduate from college, a majority of college students are “surprised” about the amount of debt they’ve accumulated. This paints a pretty grim portrait for the financial futures of such students.
Here’s one lesson not enough students are getting in college: Debt is easy to rack up and hard to destroy. Money Talks News reported that in a survey of 750 new graduates, conducted by Fidelity Investments, half were surprised by how much college-related debt they had acquired.
It also found that more than one-third of students wish they had made different choices on their path to a degree, such as saving sooner, controlling costs better, and looking for more financial aid. Some of them — 12 percent — regret their decision to go to college, CNN says.
Seventy percent of this year’s grads have college-related debt, the study says. The average amount: $35,200. That includes federal, state and private loans, plus debt owed to family and on credit cards. Fortunately, the study indicates, the news isn’t all bad:
85 percent contributed personal savings toward college costs. Among those who did, 27 percent contributed more than $10,000, and 81 percent held jobs to pay expenses.
57 percent were thinking about what they would make after graduation and chose majors accordingly. The top five listed were business, biology, psychology, engineering and accounting.
54 percent of grads have a financial plan of some sort in place, including making a budget and setting aside savings from their paychecks.
Another study, conducted by EverFi, though, shows that the reason many students are surprised by their loan debt may stem from a lack of financial education. It says that reactive help, such as default management or loan exit counseling, isn’t as good as teaching students money management all along.
“A freshman in college may beneﬁt most from education around school loans, budgeting while in school, and credit card behavior, whereas seniors in college may beneﬁt more from education around budgeting for life on their own, retirement planning, and mortgages,” the study says.
The group surveyed 40,000 college students (almost all freshmen) from across the country about banking, savings, credit cards, and school loans. It found that:
28 percent have a credit card, and nearly 25 percent have more than one.
24 percent of students with credit cards had more than $1,000 in credit card debt, while just over 5 percent had more than $5,000.
35 percent reported typically making only minimum payments, and 7.5 percent have been late on payments at least once in the past year.
86 percent have access to a checking account, although only 58 percent have a personal checking account.
Perhaps the most telling statistic uncovered by the EverFi study is that 79 percent of the students surveyed worry frequently about debt, but a majority of agree that it’s OK to have an overdraft fee if you know you can afford to pay it, and that it’s nice to own things that impress people. Nearly a third agreed it was better to have something now and pay for it later.
Students usually enter college with risky debt behavior, the study says, and it’s everybody’s job at the school to fix it. “Addressing student ﬁnancial problems should be the responsibility of the entire institution — students, faculty, student affairs, and ﬁnancial aid,” it says.