Student loan debt has been in the news a lot lately as federal lawmakers grapple with the possibility of extending the current lower interest rates on government-issued education financing, which are set to double this summer. However, many students may have limited knowledge of what they owe on these accounts.
A new study from Iowa State University found that about 40 percent of that school’s student body underestimated how much they owed on their education loans, according to a report from the Des Moines Register. About 10 percent of those surveyed underestimated their outstanding balance by more than $10,000, and just 22 percent carried no student loans at all.
The researchers say that this study also highlights the pressing need for financial aid offices to step up counseling efforts so kids can better understand the effect these loans might have on their finances for years to come, the report said. The student loan process can often be difficult to navigate and understand for those who have little and, more often, no previous experience in dealing with credit in their own names. Many studies have also shown that college kids tend to lack a general understanding of how finances work, and some have advocated the need for mandates on financial literacy education.
“You’re talking about people who, for them, borrowing is new,” Cynthia Needles Fletcher, a professor of human development and family studies at ISU, told the newspaper. “Yet these are really critical decisions.”
As a means of helping to counteract this lack of basic knowledge about their various outstanding student loans, the school is launching a program designed to increase awareness, the report said. This summer, it will send emails to all its students revealing exactly how much they owe, how much they can expect to pay per month when they graduate, and even a list of all the lenders to which they owe money.
Recent studies have shown that the average college student now graduates from school with more than $25,000 in outstanding student loans, and that the cost of a year’s tuition has expanded rapidly in the last decade. This, therefore, can be extremely problematic for recent graduates, many of whom may still struggle to find employment within a few months of getting their diplomas.
Image: Sterling College, via Flickr