Matt Bowman Source 1

Do students know the details of their student loans?

Andruska, Emily A., et al. "Do You Know What You Owe? Students' Understanding      of Their Student Loans." Journal of Student Financial Aid 44.2 (2014): 24. ProQuest. Web. 1 Mar. 2016.

This article delves into students’ financial literacy on their student debts. Using a student survey and administrative records from the Iowa State University Office of Financial Aid, the authors questioned if students knew they had student loans and, then, if they knew how much they owed on them. By using logistic and ordered logit regressions, the source was able to answer these questions quite thoroughly. The final results propose that most students realize they owe money on student loans but many underestimate the exact amount unpaid. Specifically, one-eighth of the students in the study stated they had zero student debt when they actually had an outstanding loan. Continuing, it was found that over a quarter of the subjects underestimated their owed amount by less than $10,000, and approximately one-tenth underestimated the amount by more than $10,000. The article then goes on to discuss the roles that administrators and educators have in making students understand the status of their loan debt.

This source really got me thinking about why students aren’t more aware of the details of their student loans. My overarching question on what should be done about student default rates is narrowed down slightly in the fact that I think the first plan of action should be educating students on loans before they take them out. I wasn’t aware that so many students were this naïve on how people, themselves included, were paying for college. I was actually very shocked when I read that so many people didn’t even realize they had outstanding loans, let alone the details on how and when to pay them. Going into my research, I assumed that higher default rates would come from another reason, such as inability to pay, rather than students simply now knowing they still had payments to make. The article ends with proposing some solutions to the problematic financial illiteracy of students and I most agree with the regular financial counseling. I will look further into the possible costs and benefits of setting aside time to meet with all students to discuss their current and projected financial well being while paying for college. It seems reasonable, especially with the extensive research done by the authors, that more financial education and maintenance is necessary and worth our effort. After reading this article, I definitely want to pursue more research on the student side of the issue of rising debt, rather than just focusing on the side dealing with the governmental policies themselves. My question that led me to this source (Do students know the details of their student loans?) was answered with a resounding “no.” This alarms me but sparks an interest in asking, “Why?” With this article in my back pocket, I feel as if I am better prepared to narrow down my larger, overarching question in upcoming research.

After reading this piece, I am left wondering why educating students on their financial status has fallen off the agenda of those in charge of administering loans. In research, I feel I will either be led to an answer or move to pursue the other question of, “Why have students neglected to pay attention to their own financial status in obtaining loans?” I am currently unaware which path I should devote more time to, but I am almost certain I will figure it out while questioning current policies in higher education on the topics of rising costs and default rates. My questions are still fairly broad. However, this article alone caused me to think more narrowly and look at other possibilities I hadn’t thought of that might be causing higher default rates.