More and more, students and their families are turning to student loans to finance the ever-rising costs of higher education. According to the Wall Street Journal, new estimates from the CFPB put total outstanding student debt at over $1 trillion.
However, student loan borrowers are finding that the consequences of taking out these loans is hard to understand at the outset.
According to a new study by Young Invincibles, a non-profit group that represents the interests of 18- to 34-year-olds, almost two-thirds of U.S. student- loan borrowers misunderstood or were surprised by aspects of their loans or the student-loan process. About 20 percent of the borrowers surveyed said the amount of their monthly payments was unexpected.
Equally troubling was the finding in the study that more than two-thirds of respondents with private loans said they didn’t understand the main differences between private and federal student loans. Private loans are riskier because they don’t have fixed interest rates or flexible repayment and forgiveness plans like federal loans.
It is crucial that student loan borrowers understand what they’re in for when they agree to take on student loan debt. The CFPB is developing forms to more clearly show borrowers what their options are for financing their education, and what their loan payments will be after they graduate. To learn more, visit their “Know Before You Owe” website.
Borrowers should do their homework to learn about all the ways they can finance their education, and take steps to minimize their student debt. For tips on how to graduate with less student debt, click here.