College students have a vast array of knowledge at their fingertips, but there's one area where many are positively ignorant: their own student loans.
A new survey from loan-information site LendEDU found that a majority of current college and graduate students are in the dark about the basics of their own borrowing, such as their loans' interest rates or their terms. In fact, only 7.9 percent of students who participated in the survey knew what their current interest rate was.
The surge in student borrowing has been termed a crisis, given that some 43 million Americans now owe $1.3 trillion and a significant share of those graduates in default or delinquent. Tuition has been rising at a far more rapid pace than inflation or wage growth, leaving many workers increasingly strapped to pay back their loans.
Yet LendEDU's survey indicates that students are signing on for loans with scanty financial knowledge, leaving them both debt-laden and ill-equipped to handle the consequences.
The problem may stem from the combination of a lack of financial education in America's high schools, as well as the propensity for teenagers to think about the near term, rather than to plan for a decade or more in the future.
"Students need to know their basic loan terms for an efficient repayment. If the student doesn't know the term length, how can they expect to know their monthly payment after graduation?" said LendEDU co-founder and Chief Executive Nate Matherson in an email. "Furthermore, the vast majority of students surveyed don't even realize that their loans are accumulating interest in school."
One step to helping students cope with loans would be to increase financial education while they're still in high school. Understanding that their loans are accruing interest from day one might help avoid bigger problems down the line.
"If students pay their accumulated interest in school, they can save themselves thousands of dollars in interest expenses over the life of their loan," Matherson said.
College students were sorely unfamiliar with some financial basics, the survey found. For instance, 96 percent said they didn't know that student loans could be refinanced after graduation. Almost three-quarters said they believed Sallie Mae was a person, rather than a company.
They also drastically underestimated the country's student debt load: 59 percent pegged the total in the "millions" rather than its actual tally of $1.3 trillion.
Aside from students' lack of loan knowledge, another trend stood out. Most say they rely on their parents to sort out the details, with about 85 percent saying they get information on student loans and financial aid from mom and dad. That can indicate some students may be ill-equipped to take on financial responsibility once they've matriculated, Matherson said.
"If parents handle the entire process, I believe that the student won't fully understand their debt obligations," he noted. "Moreover, after graduation the student will not be in a good position to take control of their debt."