- 27% believe the Department of Education will forgive all or part of their loan balance
- 20% believe there are no negative consequences for the cosigner if they make late payments
- 22% didn’t know their debt balance within $500
- 36% didn’t know their monthly payment within $20
The average loan amount is nearly $28K. For that much money, you’d think they’d pay attention to the forms they signed. Worse, many didn’t even know what they were going in debt for. From the survey, almost 55% regret borrowing as much as they did, and almost a quarter plan to have parents help pay the loans.
The survey was based on 400 students polled after a screener question to ensure participants met the requirements (four-year college graduates from class of 2017). We can only hope they’re not representative of the 44M+ student loan borrowers out there… those cosigners really better hope.
Chapter 3 of my book, Basic Personal Finance, opens with “The easiest way to get in trouble with money is to not pay attention to it.” The book also covers the concept of good and bad debt. While student loans can be considered good debt, students really need to consider the benefits relative to the costs incurred. Sadly, only the latter is known up front. (Judging from the survey, some students might not even know that!) Many students go into college without a plan of what to study or what career they want to pursue, making it difficult to really quantify the benefit of college. They’re likely to incur debt with little or no benefit to future earnings.
Here’s a short list of what bachelor’s degrees are worth by major (2016 average annual salary):
Computer Science $61,321
Math and Sciences $55,087
Agriculture/Natural Resources $48,729
Social Sciences $46,585
Those are salaries for people who actually get jobs. For comparison, the Bureau of Labor Statistics reports the average annual salary (2015) for workers with a high school diploma was $35,256 (workers over 25 years old in full-time jobs, not starting salaries). So, when thinking about a school loan, consider the difference between your expected salary in your chosen field and a salary with no college. That’s what your investment in education is buying you. From this data, you shouldn’t go into debt if you’re planning to get a degree in education.