A shocking number of college students don’t feel that they’re prepared to repay their loans.
When surveyed, 90 percent of students “feel they do not have all the information necessary to pay back their student loans,” according to Inside Higher Ed.
Some small changes in the direction of transparency and access could alleviate some of that anxiety. The survey, conducted by technology company EverFi and financial company Higher One that both focus on higher education, suggested some changes.
“Students most often cited their desire to have easy access to their loan balances, a better understanding of loan repayment options and help with making a repayment plan,” the report noted.
When students have simple, direct access to their debt levels, they can make better decisions.
Students’ financial engagement and knowledge varied by the type of institution, however. To teach students how to deal with that debt, two-year schools will have to divert from what four-year schools do.
“Students from two-year institutions, for example, reported engaging in more fiscally responsible monitoring behaviors including checking account balances and budgeting, but tended to have less overall financial experience,” the report noted.
Students at two-year colleges tend to be older and are more likely to default on their loan debt. They seem to be aware that they’re walking a tight financial line, and track their expenses more closely than their four-year peers. In the long term, those habits could benefit them.
“Two-year students also displayed healthier financial attitudes than their four-year peers, as they were more cautious, more averse to debt, more content, more utilitarian and less materialistic,” the report said. That hints at students who do not ignore the problem, but try to confront the high costs of a college degree as best as they can.
If schools want to teach their students financial responsibility, they’ll have to focus on debt avoidance for two-year students and teaching four-year students to budget and curb their spending, or “to distinguish between their true financial need and the loans available,” as the report put it.
However, students at both institutions are letting healthy financial habits slip. “There were significant decreases over time in nearly all of the responsible fiscal actions that students might take in the next year,” the report noted. Making only minimum payments on bills has also crept up.
The lack of confidence in their financial knowledge, however, could be misleading. College students don’t need financial knowledge as much as, say, a millennial who didn’t go to college and has their own expenses. When they need to learn financial literacy, they can pick it up quickly. Millennials are relatively optimistic about achieving their dreams, even with debt piling up. Colleges, which load students with debt in the first place, might find it prudent to teach financial literacy skills, but if they don’t, millennials will find to repay their loans. The amounts they borrow might not be wise, but it could make them more cautious about debt loads in the future.