The entire situation with college loans is somewhat controversial. While some argue that student loans are the only way for most American students to attain education, others claim that their mere existence is a sign of a deteriorating educational system per se.
With that in mind, let’s review the reasons why college students often take on loans they can’t repay. Some experts express the opinion that college loans are taken for a range of justifiable reasons. That being said, here are the most frequently-voiced reasons why people decide to take on onerous student loans.
When it comes to studying, students have countless distraction factors such as tough schedules, extracurricular activities, and even part-time jobs. As a result, many can end up losing touch with reality, and eventually misunderstanding the mere essence of loan. For instance, some students have expressed the idea that they simply forgot that any loan that has to be repaid has an additional interest component that adds to the overall loan total; as such, it’s important that every student thinking of taking on a student loan do the math so they can consider the entire amount with interest. If you’re now thinking about taking another loan, just think twice whether you’d be capable of repaying it once the studies end.
An obvious problem with student debt is the time needed to repay it. A recent study found that most students assume that they will fully repay them in six years; but, in reality, it takes approximately twenty years. Because of that, the vast majority of students overestimate their post-graduate financial success and locate themselves even deeper into debts. And for those who fail to successfully land their full-time occupations after graduation, the payoff timeline is even worse.
Financial Awareness? What’s That?
Another problem is that most students are unaware of the typical earnings in their fields. With the absence of such information, a proper decision on the student loan amount is definitely troublesome. When it comes to the nuances of the work in terms of student loan interest, most students failed to deliver the correct answer.
So, with such a high rate of financial illiteracy, it isn’t that surprising that so many students take college loans that they cannot repay. Of course, a potential solution would be to add mandatory courses on financial literacy in colleges in order to shed light on how the student loan system actually works.
So what are the main reasons for students to take on loans that they generally cannot repay? As previously mentioned, the reasons include — but aren’t limited to — the abstract perception of debts, false perceptions regarding loan repayment totals and timelines, and a general lack of basic financial acumen. Keeping these reasons in mind, it’s hoped that fewer students would take loans that are simply unpayable, even in the long-term perspective — which is why it’s important that you take into consideration these reasons while making your own decision concerning student loans.
Photo Credit: stock photo