May 23, 2013

High School Students are Clueless When It Comes to College Cost

If you’re the parent of a high school student, the results of a survey recently conducted by the Credit Union National Association (CUNA) will come as no surprise.

Nearly 50 percent of high school seniors in the United States can’t even guess how much money they will need to pay for college.

And even more appear unable to understand the basic terms of a student loan.

The CUNA survey also found that most students (70 percent) are confident they will secure a high-paying job after graduation, supporting the general willingness of students to assume higher debt in exchange for attending a college of choice.

But in reality, they simply don’t understand how aggressive borrowing will affect their financial futures or the financial futures of the adults in their lives, many of whom all-too-willingly assume debt to help them achieve their dreams.

And expectations are high for family involvement.  About 20 percent reported that family will pay their tuition outright. 

That’s one in 5 high school students who think the folks will foot the entire bill for their college education.  Note that more than 63 percent of these same respondents reported that their total family incomes were less than $100,000 per year.

The CUNA High School Student Borrowing Survey polled 847 students (ages 17 to 18) on strategies for paying for college.  Of those surveyed, 83 percent did not know the rates and 77 percent didn’t have clue about the duration of their expected or existing college loans.

And 25 percent of the kids surveyed expect to take out two or more student loans with 60 percent unable to predict how many loans they would need.

"These troubling findings suggest not just a lack of awareness of college cost or how debt works but also a lack of basic financial knowledge," said Paul Gentile, CUNA executive vice president, strategic communications and engagement.

Gentile added that even if students rely on parents to arrange financing, it’s still important for the students themselves to have a basic understanding of the level and type of college debt they are assuming.

The survey results should be concerning to parents, as 74 percent of the students said they would need a combination of federal and private loans, jobs and family money to support their tuition. 

And what do they think they will owe after graduation?  Fifteen percent said they will owe $10,000 or less; 22 percent said they will owe between $11,000 and $50,000; and 13 percent thought they would end up owing over $50,000.

Compare those numbers with a recent survey of college grads, which pegs average debt for the class of 2013 at $35,200--making it the most indebted class in history.

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