Survey Shows Most Millennials Regret Making This Mistake When Signing up for Student Loans
Applying for a student loan is the easy part. The difficult part of the process comes when it’s finally time to pay them off. However, more than a quarter of millennials with student loan debts now admit that they made one costly mistake when they signed on the loan’s contract. This is according to an online poll of over 2,000 Americans in the said generation.
Understanding the Fine Print
As the study revealed, about 18% said that they didn’t understand the terms and policies that came with their student loans so well. Another 11% admitted that they didn’t understand them at all. The good news is that there were more people who answered that they understood their loans’ stipulations ‘somewhat well (26%) and ‘very or extremely well’ (46%).
However, attention needs to be given to the cases of those millennials who may end up feeling blindsided come graduation time because they didn’t have a clear grasp of what their debt entails. This can be the case for around 37% of millennials in the study, who said that they taught themselves their knowledge of personal finance. Case in point is 35-year-old Daniela Capparelli. Being the first one to go to college in her family, she didn’t have anyone to guide on her loans, which ended up amounting to $150,000 plus interest.
The Main Problem
Perhaps the main culprit that Generation Y didn’t anticipate at first is their loan’s interest rate and how it can significantly increase what they owe in total. Thus, it’s important to know the different kinds of interests and how they add up. For example, interest accrues once the loan is deposited in the borrower’s bank account in the case of unsubsidized loans. The same happens with subsidized direct loans except that the borrower would only pay once they graduate. The government pays for interest incurred while a student is still in school.
What to Do
On average, a person would pay off their student debts at a little over 21 years. This is certainly a burden on one’s overall finances and may even hinder them from reaching some of their milestone goals. To cut this pay off time, experts recommend people to increase their monthly payments. This would also allow them to save money on interest. Those who took out more than one loan are also advised to consider refinancing them to roll these debts into one.
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