Chart: Clueless About Debt Loads
This chart comes to us from an article in the Washington Post by Christopher Ingraham, in which he provides breakdown on a fuller report by the Brookings Institute titled “Are College Students Borrowing Blindly?“
In summary, yes. Most students seem to have little clue about how much debt they have accumulated, even as they continue to borrow in pursuit of an education. I suppose any of us who have been to college or deal with current college students are probably not surprised by this. We tend to be clueless about the sum or consequences of our loans right up to the point we start paying them… after we graduate.
The most shocking tidbit comes deep into the report when the authors discover that aside from misestimating debt loads, a goodly percentage of those with loans have no clue of this fact. The money quote: “Borrowers who are not aware they have any federal debt are surprisingly common. The NPSAS data indicate that 28 percent of first-year college students with federal debt reported that they did not have any federal debt. This may be partly the result of confusion about federal vs. other kinds of debt. Among students with federal debt, 14 percent reported having no debt at all. In other words, more than one-quarter of students do not understand that they have a loan from the federal government, and about half of these students appear to be genuinely unaware of the fact that they have borrowed for their education at all.” (Emphasis Mine).
In my humble opinion this surprising, and troubling, phenomenon can be chalked up to at least three factors I witness regularly in my interactions with college-bound kids:
- Students don’t tend to go to college with a start-to-finish track in mind. It seems hard enough to simply get to campus in the first place, what with finals, graduation, SAT/ACTs, FAFSAs, college selection, and admissions taking up all of a high school senior’s mental shelf space. Upon arrival, battered and excited students will then make their various financial and course selection decisions turn-by-turn as they come up. It’s not surprising they often then fail to see the big picture and suffer a fate akin to “death by GPS” wherein all seems on track but one has no clue where one is at in the scheme of things.
- One of the particular dangers of school loans is that they get taken out over time, semester-by-semester, instead of in one bit shot in an amount to cover the total educational experience. Further, many students acquire their debt from several different sources- federal and private, subsidized and unsubsidized. Students surveyed for studies such as this one, therefore, must not remember the amount of a singular loan they took out, but the sum total of all the various loans they have accumulated over time.
- College officials like to lump the various scholarships, grants, work study programs, and loans providing the student funding under the umbrella of “financial aid.” This confuses students, for whom the word “aid” means “help from others“, while with loans in the mix some of this aid involves a lien on one’s own resources.
Whatever the reasons, it should trouble us that the majority of students do not know how much debt they have taken on and that a good chunk of said students have no idea they’ve taken on any. In response to this trend, affordology-minded students and their advisors need to map out their college plans and expenses from start to finish before they start, keep track of the sum total of debt enrollment as it’s incurred (a simple spreadsheet will do), and ask very specific questions about the nature of one’s financial aid before signing any dotted lines.