Former College Students Wish for a Do-Over on their Student Loans

By Edvisors Network October 14, 2014

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Citizens Financial Group has released survey results that show that more than three-quarters (77%) of former college students with student loans wish they had planned better for repaying their student loan debt.

Across all respondents, student debt creates feelings of being overwhelmed, stressed and worried. The anticipation of paying debt off generates feelings of relief.

The survey reveals that students and their parents had “the talk” about how to manage student loan debt before starting college. However, the depth of the conversation is perceived differently.

Forty-six percent of current students remember having a brief discussion about managing student loan debt, while former students don’t remember having the student loan repayment conversation. Parents recall the discussion with their children as an in-depth conversation. Such a lack of consensus about the depth of the conversation and/or a lack of understanding about the long-term impact of the debt may contribute to student perceptions about the best strategies for managing student loan debt.

Among other survey findings:

• Nearly three-quarters (74%) of current college students surveyed worry that they will not make enough money to pay off their student loans. This compares to less than half (42%) of former college students, who believe that for every dollar they invested in student loans, they received returns in life and career opportunities.
• More than 90% of current college students, parents and former students believe the government needs to be more proactive to make financing college more affordable and that high schools and colleges should help students better understand how to manage their student loan debt through strategies such as automatic electronic payments, deferment, consolidation and refinancing.
• More than 70% of current and former student survey respondents do not have enough information to feel confident about refinancing and wish there was someone with whom they could discuss it.
• Current and former students cited possible motivators for student loan refinancing as including saving money to put into a savings account, paying bills on time and saving to buy a home.

Despite acknowledging the benefits of going to college, such as increasing one’s capacity to get a job, improved earning potential, professional career advancement and finding a passionate career path, nearly half (47%) of the former students interviewed indicated that they might not have gone to college if they had known the impact college loan debt would have on major life events such as buying a car, getting married, starting a family, buying a home and saving for retirement.

Edvisors reminds student and parent borrowers about several important smart borrowing and repaying tips.

Tips on avoiding debt include:

• Total student loan debt at graduation should be no more than the borrower’s annual starting salary, and, ideally, a lot less.
• Consider cheaper colleges. An in-state, public university can save the student thousands of dollars each year.
• When choosing which colleges to apply to, evaluate schools by their net price. The net price is the bottom-line cost of the college after subtracting gift aid from total college costs. Gift aid is money that does not need to be repaid or earned, such as grants and scholarships. The net price is a discounted sticker price, the amount of money the family will have to pay from savings, income and loans to cover college costs. Use each college’s net price calculator to play what-if scenarios and explore the impact of financial decisions on the net price.

Student Loan Consolidation: For more information on consolidating federal and private student loans, visit StudentLoanConsolidator.com.

Tips on repaying student loans include:

• Target extra payments to the loan with the highest interest rate. (This can include credit card debt and other forms of consumer debt, not just student loan debt.)
• Borrowers should claim the student loan interest deduction on their federal income tax returns. The student loan interest deduction lets taxpayers deduct up to $2,500 in interest payments on federal and private student loans.
• Some lenders offer auto-debit discounts, sometimes called direct-debit discounts, which reduce the interest rate by 0.25% or 0.50% for borrowers who make automatic payments on their student loans.

There are also a few tips for borrowers who encounter financial difficulty:

• Earn extra money to repay student loan debt by working a second job in the evenings and week-ends.
• Cut expenses to free up cash in the borrower’s budget.
• Talk to the student loan lender before deciding to skip a payment. Lenders tend to be more flexible with borrowers who contact them first. Borrowers lose options if they default first. Ignoring the problem will not make it go away; it will only get worse.

The Citizens’ INFORMED Index: The Student Loan Landscape, conducted by Ipsos, surveyed 500 current students (between the ages of 18 and 24) with student loans, 544 parents (between the ages of 35-70) with an 18-24-year old child in college with student loans and 518 former students (between the ages of 18-40) with student loans in late August through early September 2014.