More than 44 million Americans have taken out student loans to pay for school, but, according to a new survey, they don't know much about the nuances of those loans.
Millennial Personal Finance polled 500 Americans with student loan debt who are currently in college or who graduated between 2014 and 2017. "We tested their basic knowledge on student loans by asking a few questions, and the results were uninspiring," the survey says.
Here are three categories where respondents were unsure of something or got the facts wrong:
Variable interest rates in the United Sates are based on the market rate set by the Federal Reserve, the survey notes. But 33 percent of respondents believed rates change based on monthly payments and 14 percent thought they could to change their rate at any time.
24 percent of borrowers thought rates were determined by credit score, 21 percent thought their grade point average influenced their rates and 12 percent believed that school choice or choice of major impacted their rates.
And 56 percent didn't know the interest rate on their student loans.
Federal student loan interest rates are set by Congress and private student loan rates are influenced by credit score, MPF notes.
While some loans can be forgiven, most of those are only ever partially forgiven and "it is generally hard to qualify," according to the survey.
About 34 percent of respondents believed the federal government would forgive their loans, and 15 percent didn't think they'd be required to pay back their loans at all.
In addition, 59 percent didn't know the standard repayment term on federal loans and 51 percent didn't know the length of the post-graduation grace period on federal student loans, which is six months.
Federal and private student loans can be refinanced through a lender, but 25 percent of borrowers didn't know that, and 20 percent thought only federal student loans could be refinanced.
A few other details from the survey also stand out:
- 81 percent of respondents didn't know that FAFSA stood for Free Application for Federal Student Aid
- 58 percent thought a federal student loan required a cosigner
- 25 percent thought that Senator Elizabeth Warren, as opposed to Betsy DeVos, was the Secretary of Education
Most millennials know they could do more to learn about their loans, the survey makes clear. When asked to grade themselves on their loan knowledge, 57 percent gave themselves at a C or lower.
Student loans come with wide-ranging rules and distinctions, and not all repayment plans are identical. If you want to brush up on your knowledge, learn what happens if you defer or default. And learn how you can pay back more quickly or receive assistance paying down your loans.
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