Most American Teens Know Little About Student Loan Repayment
The majority of American teens who recently registered to take the ACT test have a “shockingly low” knowledge of how the federal government helps with student loan repayments and subsidies, a new survey has found.
The findings were revealed in the “Dollars Rule Everything Around Me: College-Bound Students’ Views on Paying for College” report by the ACT’s Center for Equity in Learning. The survey analyzed data from approximately 1,200 students in grades 11 and 12.
Nearly 81 percent of the student respondents from various economic backgrounds and financial categories didn’t know that the government “subsidizes” a borrower by paying his or her interest on existing loans while the student is still in college.
70 percent of students also did not know about the loan repayment option that allows students to repay their student loans based on how much money they make in jobs after college.
“The findings highlight an urgent need for more financial literacy–specific interventions, especially in light of the economic stakes at hand,” Jim Larimore, chief officer for ACT’s Center for Equity in Learning, said.
“We are committed to helping students understand that this debt will affect their careers and other life choices. Most notably, 27 percent of African American students and 31 percent of those who are the first in their family to go to college anticipate paying for college without any family help; these are the two biggest groups who report such a high level of expecting to pay tuition without support, yet these are exactly the students who need the biggest boost.”
Nearly 42 million Americans collectively owe $1.5 trillion in student debt, and 7.2 million individuals are currently in default on those loans. Borrowers of color are significantly affected by such loans.
A recent study conducted by the University of Illinois and the University of Michigan found that loans negatively affected the wealth accumulation of Black and Hispanic adults who owed an average of $14,670 when they graduated, compared to $2,946 for students of other races.
Among Black students, 55 percent of males and 45 percent of females default on their loans within 12 years of starting college. This number stands at 35 percent for both male and female Latino students.
Earlier this week, Senator Bernie Sanders (D-VT) introduced legislation seeking to forgive more than $1.6 trillion in student debt held by 45 million people across the country. It would also make two and four-year public and tribal colleges and universities tuition-free and debt-free.