Every year, some 1.4 million college students use private student loans to finance their education, according to LendEdu, a firm that assists students seeking to refinance their obligations.
As it turns out, the majority of students do not know the ins, outs, traps and particulars associated with college-loan debt.
So came the results of a LendEdu survey of high school seniors.
Among the results:
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Do you plan on using student loans to help pay for college? 54.69 percent said yes.
Do you rely on your parents for financial aid and student loan information? 70.51 said yes.
Do you know the difference between subsidized and unsubsidized student loans? 66.41 percent said no. (The government makes interest payments on subsidized loans while the student is in school or when the loan is deferred. Borrowers are responsible for accrued interest tied to unsubsidized loans. Criteria for subsidization are based on FAFSA results and need. See below.)
Do you know how interest rates work? 62.89 percent said no.
Do private student loans accumulate interest during deferment? 66.6 percent said no. (The answer is yes.)
Do you know the risks for a student loan co-signer? 74.41 percent said no. (A co-signer is responsible for prepayment should the borrower be unable to pay. Negative marks on a credit history can affect the ability of the co-signer to get other loans, and co-signers are subject to garnishment by Social Security, should that be necessary.)
What is the current interest rate on new federally subsidized and unsubsidized student loans? 91.99 percent of students could not provide the current rate within 50 basis points. (The current interest rates range from 3.51 percent to 4 percent.)
Do unsubsidized student loans accumulate interest during deferment? 73.44 of students said no. (The answer is yes.)
Do subsidized student loans accumulate interest during deferment? 24.8 percent said yes. (The answer is no, so here the majority prevailed.)
Do you know the repayment terms of federal student loans? 80.86 percent do not. (All loans must be repaid with 10 years under the standard plan. Other plans may be available.)
Have you heard of FAFSA? 28.91 percent have not. (It the Free Application for Federal Student Aid, used to calculate a family’s financial contribution.)
Who is Sallie Mae? 48.24 percent of students do not know, and 18.55 percent believe Sallie Mae is a person. (Sallie Mae is a publicly traded company, the largest provider of education loans in the nation.)
How much outstanding student loan debt is on the books in the U.S.? 12.3 percent said “millions,” 31.84 percent said “billions,” 42.19 percent said “trillions,” and 13.67 percent said “quadrillions.” (The answer: trillions.)
Is student loan refinancing an option after graduation? 69.73 percent are unaware of such a thing. (Actually, refinancing is an option.)
Said LendEdu, “We hope the results of this survey inspire educators and lawmakers to improve the access to personal finance education in the classroom.”
C.R. Roberts: 253-597-8535