CUNA – the Credit Union National Association – last week released their first ever High School Student Borrowing Survey and the results are worrisome. The poll surveyed 847 high school students ages 17-18 on the web. The survey showed that these students have what may be a disastrous combination of a lack of financial understanding and over-exuberant optimism about their career prospects.
We’ve written before that financial education in the years leading up to when young adults begin taking out student loans could help prevent them from borrowing too much. Of the trillion dollars of student loans currently owing, roughly half are not being paid on currently – due to deferment, delinquency or default.
This study has me wondering how many of these borrowers have over-extended and over-borrowed because of similar financial naiveté. My personal experience was that the consumer finance course mandated by my high school covered just the bare bones of personal money management. We were instructed how to write a check, balance a checkbook and make a simple household budget given a set income, mortgage and household expense amounts.
Nowhere was there a discussion of debt or credit ratings. Mortgage, car loan, credit card debt nor any other type of debt were part of the curriculum. Two short years after taking this course, I signed on for my first student loan without a moment’s hesitation or any real clue what I was getting myself into. That was in the early 90s. These survey results though could have just as well been taken from polling my Gen X buddies as today’s New Millennials.
Here are the high points of the CUNA survey results:
- ⇒ 70% of students are sure they will get a high-paying job after college
- ⇒ 74% of students predict they will need to borrow to pay for college
- ⇒ 25% of students believe they’ll need to take out two or more loans to pay for college
- ⇒ 60% of students had no idea how many loans they would need to cover college costs
- ⇒ 74% of students say it will take federal and private loans, family money and a job to pay for school
- ⇒ 83% of students had no idea what interest rates come along with student loans
- ⇒ 77% of students had no idea how long it would take to pay off student debt
- ⇒ 20% of students say their parents will pay their tuition out of pocket
For the 20% who think their parents will pony up 100% of their cost of their college, this may be an assumption. Parents have been hit hard by the recession, many are still paying off their own student loans and if there are multiple kids to put through school, simply writing a check is an option for very few families.
Another issue likely at play is that this generation is one that has been… well… spoiled and coddled by their adoring parents. This is a generation of kids whose doting folks eagerly rack up credit card debt to treat their progeny to Disneyland vacations complete with fancy ear ensembles. These teens have few responsibilities, a wide array of digital devices handed to them, far too much screen time and far less accountability than any generation prior. This is not a recipe for future financial success.
CUNA sees (and we agree) that the brash confidence that a high salary will automatically follow college is a major red flag. This could mean that these students are likely not concerned about piling on debt because they’re confident paying it off won’t be a problem. In fact, unemployment and low paying jobs are what await many recent and rising grads. These are the same alumni that struggle with student loans to the extent that their debt is delaying their ability to buy a home, get married or have children.
Our country cannot afford to keep blindly piling more student loan debt on top of the trillion already outstanding. High schools and colleges need to immediately implement much more stringent financial education courses that focus on debt – student loans, credit cards, auto loans and all other forms of debt. Even better would be to begin teaching money and debt matters earlier, starting in elementary and then expanding it in middle school and even further in high school. As GI Joe tells us “Knowing is half the battle…”
If you want to get in the know about your student loans, try Tuition.io’s free student loan tool to manage your debt, view your loans easily in one convenient interface, see repayment plans and contact your lenders.
Also check out these related blogs on student loan debt, financial education and the student loan crisis: