College undergrads aren't letting the prospect of student loan debt interfere with their plans for financial security, a new study suggests.
The 2017 Student Financial Literacy Study by Minneapolis-based U.S. Bank, shows that young adults are more interested in learning about saving money (51 percent), investing money (43 percent) and understanding credit (40 percent) than they are about debt and money management (28 percent).
At the same time, the survey also shows that erasing debt ranks among students' top financial goals in the first five years after college. First is having a steady job (45 percent), followed by paying off loans (27 percent).
"Debt is already a part of many students' lives," said Ederick Lokpez, head of student financial education at U.S. Bank. "In our focus groups, students told us that learning basics like savings, investing and credit will help them better manage their debt and finances."
Of the three areas students are most interested in, credit is the one they typically can start doing something about while still in college.
"They really don't think about the fact that they don't have any credit," said certified financial planner Amy Hubble, an investment advisor and founding principal of Radix Financial in Oklahoma City. "I try to push an understanding of it because it's one of the biggest pieces influencing their [financial] future."
Credit scores affect the interest rates you pay on the debt you incur, including things such as credit cards, car loans and mortgages.
The U.S. Bank study shows that misconceptions about credit persist among young adults.
For example, 58 percent of respondents are wrong in their belief that once a delinquent loan or credit card balance is paid off, it comes off your credit history. In fact, that negative information remains part of your report for seven to 10 years, depending on the particulars of the account.
Hubble said she attempts to get students to try building credit early, because generally speaking, the older your credit history is, the better.
"If they can get their parents to add them to a credit card account – even if they never access the card itself – it helps build credit longevity," Hubble said.
Basically, companies assume that good (or bad) past credit behavior is a predictor of future behavior. The farther they can see into your past, the more willing they are to give you favorable interest rates on loans and credit if they like what they see.