Report: Students incur debt without a realistic idea of how to repay it

Carolyn DePew

Staff Writer

Despite long hours of waiting in line to secure vital student loans, college students across the country fail to realize the amount of debt they are committing to before they ever begin their careers, according to a recent survey.

Even at the University of Houston, which charges only $1,194.50 to Texas residents for a 15-hour semester, lines of waiting students snake down the halls of the E. Cullen Building outside the financial aid office.

"I had to wait an hour and a half in line to get a book loan at the beginning of the spring semester," said junior English major Christopher Martin. "I talked to some other students, and they said that amount of time was about average."

The study, conducted by the SallieMae Education Institute and the American Council on Education, reported that students placed getting a degree before concerns about accumulating debt.

While students surveyed considered student loans necessary to obtain their education, many were reported as saying they preferred not to think about their loans until they needed to be repaid.

"I don't know how I'm going to pay off these loans," said freshman chemical engineering major Nathan Smith.

"Some of my Federal Pell Grants were changed to loans because of mine and my parents' tax returns, and some of my funding was taken away altogether," he said.

Most students plan on repaying these loans, which normally do not come due until six months after graduation, with the high-paying jobs they will obtain with their shiny new degrees. The study showed that their expectations may not be realistic.

"No matter how much students seem to think they will make once out of school, many, particularly undergraduates, have trouble making the connection between the salary they earn and meeting their month to month financial obligations," the report said.

"This is exacerbated by the fact that many students have unrealistic expectations of the starting salaries typical college graduates receive."

The report listed several examples of students' estimates of their starting salaries, including a student planning on going to medical school who projected making "$200,000 ... at least $150,000 to start."

The report also listed a student who planned on opening her own business and making "at least $50,000," even though she had no plans of what her actual business would be.

The report, Students in Debt: Attitudes and Behavior of College Students Toward Borrowing Money, was conducted to "gain insight on students' financial literacy," said SallieMae president John Reeves.

"It is critical that students understand the terms of their credit cards and education loans and how these obligations will affect them financially in the future," said ACE Director of Federal Policy Analysis Jacqueline King.

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