As each academic year approaches, the student loan season kicks into gear. During the summer preceding the Fall semester, newly graduated high school seniors jump on to the student loan bandwagon, a wagon that seven out of ten college students ride.
It is no surprise that these graduates need student loans with the rising cost of tuition nationwide. Student loan debt is rising as well. The graduating class of 2016 made out with an average debt tally of $28,000 per student. If high schoolers heard about that, then they might think twice about student loans.
On that note, it is surprising to hear about how much high school know about these loans which was the focus of a LendEDU survey. In short, high school seniors know nothing about student loans. Some key results are mentioned below.
These results illustrate the situation many of these high school graduates are in. Over half of graduating seniors plan on using student loans during college; on top of that, roughly 70% are financially dependent on their parents.
When asked basic questions about student loans, the high school seniors did not answer very well. 66% did not know the difference between a subsidized and un-subsidized loan which are two common federal loans. On that note, these students did not know the major differences between federal and private student loans. To top it all off, 70% of students did not know what student loan refinancing is, nor did they know it was an option.
A majority (63%) did not know how an interest rate worked. This explains why 67% thought interest did not accumulate during deferment periods. 92% of the poll did not know this year’s federal student loan interest rate.
Other basic questions were butchered. About a third of high school seniors have not heard about the FAFSA; additionally, half of these seniors do not know what FAFSA stands for. Nearly half of seniors do know about Sallie Mae, one of the leading private student loan lenders. On top of that, 20% of students think Sallie Mae is a person, not a company.
Close to 15% of students believe the outstanding student loan debt tally is in the “quadrillions.” To be fair, 40% of students got that question right. Despite this, it is clear that high school seniors have no clue what they are getting into with student loans. There is a clear knowledge vacuum. Today, only 17 states implement mandatory personal finance classes. There just is no consistent education standard on student loans and personal finance. This simply catalyzes the student loan debacle which becomes more serious each passing year.