One-Third of Millennials Didn’t Understand Student Loans Before Borrowing
As we work our way into the 2020 election cycle, student debt is once again a major topic on the campaign trail. While different candidates offer their own solutions for what should be done to ease the burden on students and ideas such as free college are even thrown around, one less discussed aspect of the crisis is how to educate young adults about borrowing and other personal finance topics. Now a newly released study suggests that many Millennials who may not have known what they were getting themselves into when taking out their loans believe personal finance courses should be included in school curriculum.
A survey from online lender Laurel Road found that 44% of Millennials didn’t understand their repayment timelines prior to taking out their loans. In fact one-third admit they didn’t know about interest rates, monthly payments, refinancing, or other basics when borrowing. What’s more the number of Millennials who say they didn’t fully understand their college financing options increased this year, rising from 25% to 34%.
Unfortunately the personal finance troubles didn’t stop there. When it comes to retirement, 30% of overall respondents and 34% of Millennials say they don’t have any money saved while 46% had less than $1,000. Once again education may be a factor as less than one-third of those surveyed were aware of how to save for retirement before they graduated college. A similar lack of emergency funds was also found, as 61% of Millennials reported having less than $500 on-hand for an unexpected expense.
One of the reasons so many students report lacking knowledge of these topics could be the absence of personal finance courses in schools — something the vast majority of respondents think should change. Laurel Road’s survey found that a whopping 94% of college-educated adults asserted that taking a personal finance course should be a requirement for graduating high school or college. Of those, 74% thought that making such a course a high school graduation requirement would be preferable. Interestingly 75% even said that education in personal finance would make a better college graduation present that a check for one month’s rent.
Turning to the bright side of the report, a great majority of those surveyed reported taking a greater interesting personal finance. The study found that 87% of Millennials and three-quarters of overall responders spent more time managing their finances this year than last. This includes investing more in retirement accounts and stocks, taking a finance course, speaking with financial advisors, and more.
There’s no questions that the amount of student debt held by Americans has become a crisis. As a result there are several ideas being proposed to address these debts. However it’s increasingly clear that any long-term solution should also include personal finance education so that students not only know more about the loans they’re taking out but will hopefully also know how to save for retirement, build an emergency fund, and more as early as possible