Rising tuition cost and extreme student loan debt has created a financial crisis in the United States, which not only threatens the future prospects of young Americans, but also continues to get worse with each passing fiscal year.
Last year, researchers claimed extreme college debt would turn millennials into corporate slaves, forcing them to work well into their 70s in order to pay off their loans. A recent analysis makes it look like the young generation will not retire anytime soon if they continue with their ignorance regarding important financial matters — especially because their student loans that would follow them to their graves by the looks of it.
The study, conducted by a company called Lendedu that provides information about loan refinancing, reveals most American students “don't know what they owe, how to repay it, and what the government can do to collect the debt.”
The company surveyed three Bay area campuses and talked to 477 undergraduate and graduate students. Among those interviewed, only 6 percent knew how long it would take them to repay the debt while just 8 percent knew the interest rate on their loan.
In addition to that, more than 90 percent or the respondents had no idea which type of loans accumulate interest during school and which do not. About 59 percent also believed that Americans hold a few “millions” in student debt, when in reality the figure is alarming $1.3 trillion.
“The lack of literacy about the personal finances of college going is almost certainly leading some students into decisions that they later come to regret,” warned researchers Elizabeth Akers and Matthew Chingo in a 2014 Brookings survey. “The consequences of their decisions come as a surprise to them once it’s too late.”
Apart from the fact that young borrowers don’t realize that their financial savvy can actually help them pay off their loans sooner, the researchers also found most students have no idea what the government can do to them if they stop paying back their debt.
Most of the student debtors fail to realize that the government can take money from their wages, Social Security payments and tax refunds. Even if one declares bankruptcy, it is extremely hard to get rid of student loans unlike almost every other form of consumer debt.
One way to tackle this incredible ignorance would be to use social media to announce basic information about the loans. Colleges and universities should also organize mandatory seminars and symposiums to create awareness, or else this issue will get even worse.