Mar 26 - Why College Students Do Not Understand Their Loans

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Why College Students Do Not Understand Their Loans

A recent study by an organization called the Young Invincibles found that 65 percent of students did not understand the type of loan they had taken out or the terms of repayment. Published on March 21, 2012, the study surveyed 6,500 graduate-level and undergraduate students who had taken out some amount of student loans. The results are troubling to loan officials who worry that loan repayment may continue to be a problem for recent college graduates who are having trouble finding jobs.


Loans are boring and confusing

Some of this is understandable, just from a standpoint of human behavior. Arguably, everyone knows that you are supposed to "read the fine print," but young students will not necessarily take the time to read language that is potentially boring or difficult to understand. Loan documents are written in such a way that the organization is covered legally. Creating easy to understand language is not necessarily the priority. Granted, this is typically an essential feature of fine print that is created to document all the aspects of legal compliance.


Large loan amounts are hard to grasp

Even if students grasp that they are borrowing a large amount of money, there is the reality that loans can be difficult to understand in general. This also applies to mortgages, which are theoretically taken out by responsible adults who will take the time to read the fine print. In addition, the size of loan can be difficult to grasp. Let's[..]ume a student takes out a $40,000 loan. Do they really know how that monthly payment will impact their day-to-day budget when they graduate? If they took out a $50-$60,000 loan, would they really know the difference in terms of future financing when they graduate?


Students have a sense of optimism

As someone who teaches college students, I can tell you that it is not uncommon for students to have a strong sense of optimism about their future. Most of the time, that is a positive trait. Perhaps some of this optimism stems from a general lack of experience, or a sense of denial. When you take out a loan, you do so with the[..]umption that things will work out in the future. The college student may believe that they will get a high-paying job, pay off their loans in a few short years and then start acquiring all the material possessions that are part of the American Dream. Unfortunately, America is about buy now and pay later, which means that we as a country do not have a great track record of managing or understanding our consumer debt.

Do college students really not understand their loans? Or are they just naively optimistic to the point where they believe they do not have to figure out all the fine print? Regardless of the reason, thousands of students are now facing the cold, hard reality that they should have done a bit more reading of the fine print.

That's because the majority of college students are ignorantly stupid [pic]

They were told their whole lives "you need a college education" so they believe it...

There should be a manditory cla#s in high school teaching you about college, the loans, and all that in you Junior/Senior year.

I don't feel bad for anyone that goes for a "buisness" degree and wastes $20k + a year on it.

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i went to school and studied computer info system and switch to web development .. I understood what my pay scale would be... but i would look at all these ppl getting their masters to do Early Childhood to become a teacher and i just smh.. its like ur adding mad debt for a career that doesnt pay unless you become a principal ... Long story short know what ur studying and how much you CAN make because once you do that , you will avoid the okie dokie

i owe 12 g's in loans

Im at about 10 gs. From 40 ish. Hoping to lay it off by the end of the year. Then its home free

Actually teachers have a break. If you pay for 4 or 5 yrs with no defaults, sallie mae will do forgiveness on the rest of the money owe. *im a prek teacher going through this process now* well until i started grad school put it picks back up as soon as i finish school again. I dont have to start over. The only plus side about teacher benefits[pic]

I haven't taken out a loan [pic]
....Yet.
F*ck a Masters degree in Art though...[pic]

That !! happened to my friends mom had here like... [pic]

your right but i also blame, your friends and family that dont tell you any different. They still think school is the only way to go or you will be a bum. Can't 100% fault the student for not trying to look like a failure

I pay cash to go to night school. Got my a.s. In management for 10 g,s that I paid out of pocket. I'm working at a business school now and get free tuition. I feel bad for the moron students who are paying 40 grand a year to go to that !!ty school.

I recently spoke with a clinical psych student who is about to graduate in a year and has acquired 200,000 dollars of debt...

<------ Accounting degree. 33,000 Loan paid in 4 years :dancingcool:

Financial aid >>>>>

nicca said buisness [pic]



I can tell you need to stay in school [pic]

i just dont understand how a family cant see the ma#sive amount of debt their child will build up and have to pay for in a career that isnt that needed.

my dad hounded my sister her whole senior year about the choices she was making to the point she barely even wanted to talk to him.


but that !! understands what shes in for now, she actually switched majors because she really researched what she could make with her original and it wasnt !! compared to what she would have to pay back.

shes still goin for 6 years though [pic]

shes gonna have a mortgage payment by the time shes out

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But for some strange reason I still think that'll come back and bite me in the[..].[pic]

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Thank god I worked and paid for my cla#ses out of pocket for my undergrad. Took 5 years but I never took a loan

Make sure your getting grants and not loans. "financial aid" can be be an unsubsidized loan.