BETA
This is a BETA experience. You may opt-out by clicking here

More From Forbes

Edit Story

Almost 70% Of Gen Z Know 'Literally Nothing'​ About Student Loans

This article is more than 7 years old.

How is it that 1 in 6 student loan borrowers are in default on $56 billion in student debt? It's because no one understands what they are actually borrowing and how to develop an actual plan to repay it back.

At NextGenVest.com, we recently conducted a national survey* of current high school seniors who are in the process of deciding between college acceptances and financial aid packages. We help students navigate paying for college over text message so all responses were collected over SMS. A few key statistics stand out as particularly alarming:

68% of students are taking out loans they don't understand

We found that 68% of students said “they literally knew nothing” about student loan payment or refinancing services available to them after college. Literally knowing nothing about the biggest financial decision of your life is not encouraging, however, it's not entirely surprising given the complexity of financial aid packages that universities award to colleges. Below is an example "Award Letter" that a student asked one of our #MoneyMentors for help interpreting.

Image from www.nextgenvest.com

Can you spot why this is confusing? "Remaining Cost" is listed as $0, yet "Total Estimated Financial Aid" includes a $54k in loans ($56,007 - $1,665 in Pell Grants) plus interest which isn't listed on this Financial Aid Award Letter.

Only 31% of students had guidance navigating college financing

Of the students we surveyed only 31% of them indicated that their high school had hosted any type of financial aid workshop, scholarship session, or parent night, on the confusing college financing process. This is also not entirely surprising as the job of a college counselor is clearly overwhelming. The average college counselor to student ratio is 1 counselor : 476 students. That's 476 recommendation letters, deadlines to keep track of, and college essays to help with outside of #FAFSA Workshops.

45% say navigating financial aid paperwork is more stressful than standardized tests

Remember trying to remember random vocabulary words? Trying to write a 1.5 page essay in the span of 30 minutes on a short story excerpt? Applying a geometry equation in under 2 minutes? Financial aid paperwork is worse than all of that for 45% of students. Compiling tax forms, answering a little over 400 questions, and remembering passwords creates much of the anxiety. With potential changes to #DACA students as well given a changing political climate, many families are also not willing to share personal information that is asked on these forms. The stress and annoyance of filling out these forms is ultimately why students leave $2.7 billion in free federal aid unclaimed each year that they would qualify for.

With student loan debt reaching $1.4 trillion outstanding and growing approximately $100 billion each year, this is clearly a problem is not going away.

*225 high school seniors students were surveyed across Chicago, Atlanta, Houston, New York City, San Diego, Los Angeles, Brooklyn, Washington D.C, Staten Island, Denver, and Philadelphia. 

 

Follow me on TwitterCheck out my website