Think back to high school. As an 18 year old, what did you know about personal finance? Could you make a monthly budget? Did you even know what compound interest was?
A recent study by Citizen’s Financial Group highlights the regrets of former students and parents as well as the need for better financial education in our high schools.
“77 percent of former students wish they had planned better to manage their student loan debt.”
– Citizen’s Financial Group study
Student Loan Regrets
Though over 80 percent of those served felt college was still a good investment, a large majority (62 percent) report not being comfortable with their debt levels. More troubling is that 23 percent state that they are not able to keep current on their payments.
As students progress from current students to former students, their perception of their student debt changes. When current students were asked how long they expected to be paying back their students loans, the average response was until age 33. When former students were asked the same question, the average response was age 41.
The Desire for Further Education
Seventy-seven percent of former students wish they had planned better to manage their student loan debt. Similarly, 70 percent worry that they don’t have the necessary financial background to manage their current debt.
Because most high schools do not offer any sort of detailed financial education, this training is often left to parents. Sadly, most students say their parents failed them in this regard. Only 15 percent of former students report having had detailed conversations with their parents about student loans and personal finances. The number isn’t much better for current students, with only 23 percent reporting detailed conversations.
Advice from former students
Some of the former students who participated in the study provided advice for current and future students:
• “Have a detailed plan in place to make payments. Also, have at least one or two back-up plans.”
• “My advice would be to act like you have to start paying the loans off the day you start college. Act like it is a debt that should be attended to and focused on. That way, when you have to start paying it off, you will have a bit saved and understand the process.”
• “Go talk to your parents in depth about a game plan so you can handle what you can afford but at the same time not have to be strapped your whole life.”
• “Choose a college wisely. Just because it is expensive, it is not always better. Start by going to community colleges first.”
• “I would tell them to speak with a financial planner prior to taking out loans, and to be careful not to take out more than they need.”
The Bottom Line
The results of the study make one fact painfully clear. Many students are in over their head when it comes to student debt, and most are ill-equipped to make smart decisions and to do the necessary planning.