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Are College Students Borrowing Blindly?

Matthew M. Chingos and Beth Akers

Improving the college search process by making college costs more transparent to potential students and their families has been a primary focus of recent higher education policy efforts. But the importance of this information does not end at the university gates. In order to make prudent decisions about what to study, how many courses to take, and what kinds of jobs to pursue, college students should continue to bear in mind the cost of their education and the loan payments they will eventually have to make as they progress through school. But do they?

In this analysis, Elizabeth Akers and Matthew Chingos draw on data from two sources that link student survey responses to administrative records on costs and borrowing. Their findings suggest that a significant share of undergraduate students do not understand how much they are paying for college or how much debt they are taking on. Specifically, the authors find that:

  1. Only a bare majority of respondents (52 percent) at a selective public university were able to correctly identify (within a $5,000 range) what they paid for their first year of college. The remaining students underestimate (25 percent), overestimate (17 percent), or say they don’t know (seven percent).
  2. About half of all first-year students in the U.S. (based on nationally representative data) seriously underestimate how much student debt they have, and less than one-third provide an accurate estimate within a reasonable margin of error. The remaining quarter of students overestimate their level of federal debt.
  3. Among all first-year students with federal loans, 28 percent reported having no federal debt and 14 percent said they didn’t have any student debt at all.

Students who do not have a good idea of their level of borrowing are likely to be surprised or even fearful when their first loan payments come due, which may impose an emotional burden on borrowers. More broadly, it may perpetuate popular narratives about crushing student loan burdens, which could discourage promising students from pursuing a college education.

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