ACT has released a new study in which it was determined that a “shockingly low” number of high school students actually understand how college financial aid actually works.
ACT interviewed 1,200 high school students in April 2018 and determined that regardless of economic background, most families considered the cost of attending college at the top of their list of concerns.
Despite a valid concern over rising college costs, most students didn’t understand financial aid which is made up of scholarships, grants, work-study programs, and standard loans.
The study found that 70% of students have no idea that government loans are subsidized, meaning interest doesn’t accrue when the student is enrolled in college.
When asked about repayment of their loans, most students also didn’t realize they can repay their loans on an “income-driven” model which helps reduce at least a little bit of their post-college financial burden.
A Forbes article published in February 2019 estimates that there is now $1.56 trillion in outstanding student loans with 44.7 million borrowers. On top of all that debt, 11.4% of borrowers are delinquent on their loans, meaning they haven’t made a payment in 90+ days.
With such a low understanding of how financial aid works and often false promises that high-paying jobs will help students at a time when wages are not increasing fast enough, it’s no wonder many politicians are focused on what they now refer to as a “crisis.”