Are U.S. college graduates “surprised” by the amount of student loan debt they’ve accumulated?
You bet they are. But the real question is this: How did college grads not see this loan debt tsunami coming?
More data are pouring in confirming that college students are in over their heads – at least from a financial point of view. According to Fidelity Investments’ second Cost-Conscious College Graduates Study, released Friday, 70 percent of the college Class of 2013 owes, on average, $35,000 in student loan debt private and public, as well as debt owed on credit cards and from family loans.
That amount would get you a brand-new Audi A5 2.0T Quattro manual premium automobile or 10 percent down on a $350,000 house. But $35,000 is also a down payment on a presumed lifetime of higher earnings, as study after study shows that college graduates make more money than non-college graduates.
What’s disturbing is that college graduates didn’t see this burden coming — the Fidelity study says that about 50 percent of new college grads are surprised by how much student loan debt they own and 39 percent of college graduates would have made different choices if they realized how much debt they’d pile up. That’s 14 percent higher than the first Cost Conscious Study last year.
According to Fidelity, if college graduates had it all to do over again, they would have:
- Saved money as early as possible.
- Been more diligent about researching financial aid options.
- Kept a closer eye on their budgets and spending while in college.
“The number of graduates reporting surprise by the level of student debt they have accumulated is a big concern and shows that there is a considerable need for families to better understand the total cost of college,” says Keith Bernhardt, vice president of college planning at Fidelity.
Bernhardt says parents and college-bound kids need to discuss potential financial burdens and better ways to pay for a degree as early as possible.
“It is critically important for families to have thorough discussions related to college planning a lot earlier than they do now, and to understand their options and create a college savings and funding plan to help avoid significant post-graduation debt,” Bernhardt says.
There is some good news from the study. About 85 percent of college students contributed some of their own savings for school, with 27 percent contributing more than $10,000. Additionally, 50 percent say that paying off their student loan debt is a “top priority.”
But the real narrative coming out of the Fidelity study is that “surprise” factor. If college students and their families don’t see a $35,000 debt storm coming, that suggests they never had a financial plan in the first place.