Students today are graduating from college with an average student loan debt of over $28,000. While this is obviously a crisis that has many causes, there are some causes we talk about more often than others.

If you follow news about the mounting student loans debt, you will most often hear people talk about the problem of rising tuition prices which is often blamed on things like the reductions in state funding for state colleges, overblown infrastructure spending on campuses, and bloated college administration budgets.  

These problems absolutely contribute to the ballooning of student loan debt and we should be proactively doing something about them. But these are all big problems that require complex solutions and the political will to fix. They are also all problems that will take time to change.

For the incoming class of college freshmen who will be arriving on campuses this fall, it’s already too late to implement system wide solutions that will lower their student loan burdens. But there is something that we could be doing for them and the freshmen who will be starting college in the next few years.

We could be providing them with critical information to help them understand how to reduce the impact student loans will have on their lives. But it doesn’t appear like we’re doing that effectively.

Students Don’t Understand Their Loans

While college students are adults who can sign on the dotted line of their student loan contract, that doesn’t mean that they understand the implications of what they are agreeing to.

In January 2016, LendEDU surveyed current college students to try to find out how much they knew about their student loans. The results were shocking. Almost 97% didn’t know which of their loans accumulated interest while they were in school or during deferment. Almost 76% of students didn’t know the difference between private student loans and federal student loans. Only 75% of them actually knew how interest rates worked and 85% relied on their parents for information about financial aid and student loans. Ultimately, what the study revealed was that students have a shocking lack of understanding about their loans.

Why Understanding Their Student Loans Matters

Many students have been told by well-meaning parents and teachers that getting a college degree is the ticket to a well paying job. For that reason, these students assume that high levels of student debt don’t really matter since it will get paid off easily when they graduate.

But with our current high youth unemployment, that’s not always the case and many graduates are leaving school with high amounts of student loan debt and few job prospects.  That’s leading to a whole generation of Americans who are overwhelmed and unable to pay back their student loan debt. Many also struggle to pay back their loans and find themselves having to put off important life milestones like getting married, having children, moving out of their parents’ homes, and buying their first houses.

Graduating college without large amounts of student loan debt is rare, but it is still possible. If students are aware when they’re in high school about the implications that high student loan debt will have on their lives, then they can make different choices.

There are a lot of ways that individual students can reduce their student loan burden. The first thing that they can do is start saving in high school by taking on after school or summer jobs.

When it comes time to choose a college, a student can decide to go to a community college or a school close to home for a few years to save money and then transfer to another school. Or a student might choose to go to the school that offers them the most money in scholarships or financial aid rather than one that might be seen as more prestigious.

While in school, college students can be careful not to fail courses since they are costly to repeat, work during the school year, and keep a strict budget in order to reduce the amount of debt they incur. They might also decide to major or minor in a subject that they have a higher likelihood of getting a job in.

When Should Student Loan Education Start?

Education about student loans should start as early as possible in high school. As soon as schools start to talk to students about college, they should also begin discussing student loans.  Teachers should talk about how student loans can be helpful but how too much student debt can impact important life plans. Creating sample budgets so that students understand how their student loan payments will impact their future lifestyle would be helpful.

Having former students come back and talk about how their large student loans are affecting their lives might be a great way to help high school students understand the impact of student loan decisions. Discussing these issues with parents would also be helpful, since the LendEDU study showed that most students make their student loan decisions in collaboration with their parents. Tips could be given aimed at helping families reduce their reliance on student loans.

Colleges should continue educating young people about student loans when they arrive on campus with mandatory information sessions where students are required to demonstrate an understanding of how student loans work in order to receive their loan money.

While student loans can help students who would not otherwise be able to go to college get their degree, they can also burden students with a lifetime of difficult payments. It’s critical that we figure out how to make current students understand the impact of their student loan decisions on the rest of their lives even while we try to reform the system for future students.


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*LendEDU is owned by Shop Tutors, Inc., the parent company of Student Loan Report, LLC.