As student loan debt mounts, high schoolers 'shockingly' unaware of aid options
Exorbitant college costs are a significant problem for Americans, but new research shows prospective college students are unaware of how the financial aid process works.
A new study from ACT, which surveyed about 1,200 last year, found that many students “lack the most up-to-date … debt-related information” needed to make enrollment and financial aid decisions.
Researchers classified most college-bound students’ awareness as “shockingly low,” no matter what economic background or financial category they belonged to.
That’s particularly troubling at a time when outstanding student loan debt has surpassed $1.5 trillion, second only to mortgage debt.
Meanwhile, tuition and fees for the 2018-2019 school year averaged $35,830 at four-year private, nonprofit institutions, according to data from The College Board. At public four-year in-state institutions, the average was $10,230 – and $26,290 at public, four-year out-of-state colleges.
The average borrower has nearly $40,000 in student loan debt.
Here’s a look at what most college students surveyed did not know about the financing process.
- An “overwhelming majority” didn’t know that the U.S. government subsidizes a borrower by paying interest on existing loans while the student is still in college.
- A majority of respondents did not know about loan repayment options, which allows students to repay loans based on their earnings after college.
Two-thirds of survey respondents were eligible for Pell Grants, averse to any college-based debt or paying for college themselves.
All groups of students said, however, that they consider the cost of college an important factor in ultimately determining where they go.
As previously reported by FOX Business, many people don’t apply to for Free Application for Federal Student Aid (FAFSA) – even if they are familiar with the option.
Trey Peterson of Haven Financial Group told FOX Business that the reasons people don’t apply include the fact that they find it difficult to fill out the application, and/or assume that they won’t qualify for aid.
If you apply, “there is a good chance you will qualify,” Peterson said, adding that failure to do so could cause families to miss out on thousands of dollars.
CLICK HERE TO GET THE FOX BUSINESS APP
Federal grants do not need to be repaid, which will limit a student’s debt burdens after graduation. And federal loans tend to have low interest rates.
Each year the Department of Education awards about $120 billion in grants, loans and other funds to help millions of students afford education costs. It is the largest provider of student financial aid in the country.