Clueless: Many College Students Don’t Understand How Much Debt They’re Accumulating

With much public attention focused on the increasing costs of college education and the ever-growing levels of student loan debt saddling graduates of higher education institutions, recent research into what students understand – or don’t understand - about their debt is raising some concern. A significant share of undergraduate college students, it turns out, do not realize how much they are paying for college or how much debt they are taking on to do so.  That is the conclusion of a study of college students’ awareness of their level of debt as they accumulate various loans to pay for their higher 1

borrowing blindlyThe report, by Brookings Institution, found that “about half of all first-year students in the U.S. seriously underestimate how much student debt they have, and less than one-third provide an accurate estimate within a reasonable margin of error.”

Surprisingly, among students with federal loans, 28 percent reported having no federal debt and 14 percent said they didn’t have any student debt at all, the researchers found. “Enrolled college students,” the report says, “do not have a firm grasp on their financial positions, including both the price they are paying for matriculation and the debt they are accruing.”

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, the Brookings report points out. “But the importance of this information does not end at the university gates,” the report states.

In the analysis, study authors Elizabeth Akers and Matthew Chingos of the Brown Center on Education Policy at Brookings find that:chart

  • 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).
  • 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.
  • 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.

The report suggests that without a solid understanding of the financial situation, “it’s unlikely that students will be able to make savvy decisions regarding enrollment, major selection, persistence, and employment. Without knowledge of their financial circumstances, a student with a large sum of debt might be unprepared to compete for the jobs that would pay generously enough to allow them to repay their debt without having to enter an income-based repayment program.”

college 2The report also concludes by noting that “many students look back on their educational experiences with some regret about the financial circumstances. Some wish they had not gone to college in the first place, while others wish they had borrowed less or earned a different degree. The lack of literacy about the personal finances of college going is almost certainly leading some students into decisions that they later come to regret. The problem with the lack of financial savvy among enrolled college students is that the consequences of their decisions come as a surprise to them once it’s too late.”

The Brookings Institution is a private nonprofit organization devoted to independent research and innovative policy solutions.  The mission of the Brown Center on Education Policy at Brookings is to bring rigorous empirical analysis to bear on education policy in the United States. The primary activities of the Brown Center are based on quantitative social science, and are responsive to the immediate interests and needs of those who participate in policymaking.

International Air Travel Connections Drop in Hartford, Jump in New Haven

The Brookings Institute has released data on the flow of international passengers in and out of the largest U.S. metropolitan areas.  The web-based data, drawn from a new report primarily comparing 2003 with 2011, highlights the scale of passenger traffic flows and points to the international markets where these ties are particularly strong. The report, “Global Gateways:  International Aviation in Metropolitan America,” released in October 2012, found that:

  • International air travel in and out of the United States more than doubled between 1990 and 2011. The growth in international passengers during the 21-year period was more than double the growth in domestic passengers and real GDP
  •  Since 2003, international air travel grew between the United States and every global region, with the strongest growth coming from emerging markets.
  • Just 17 metropolitan gateways captured 73 percent of all international passengers starting or ending their trip in the United States as well as 97 percent of all international transfer passengers.
  • As metropolitan economies expand their global reach through trade and investment, international avia­tion plays a pivotal role in the movement of people across national borders.

The national growth was not uniformly reflected in Connecticut.  Of all passengers flying to or from an international destination in Hartford, 17.9% flew direct.  The remainder required connecting flights.  The number of passengers flying internationally thru Hartford dropped from 347,311 in 2003 to 278,997 in 2011, a downward change of nearly 20 percent.  In 2003, Hartford was 40th of 90 airport locations; by 2011 that had dropped to  47th of 90.  The change was a 19.7 percent drop.

By way of comparison, Providence ranked 49th in 2003 in international travelers and 69th in 2011, reflecting a drop in passengers from 187,819 to 126,423, a drop of 32.7 percent.

The numbers for New Haven were considerably smaller, but tell an interesting story nonetheless.  The number of international travelers touching New Haven jumped by 133.5 percent between 2003 and 2011, from 1,645 passengers to 3,841 passengers.  That’s the largest percentage increase of any of the 90 locations in the nation.  In terms of the number of passengers, however, New Haven nudged upward from dead last (90th out of 90) to 89th.

The Brookings data “goes beyond describing where passengers are going and tells us how they get there.”  Using data on transfer points and a map that visualizes each leg of each international route, it paints a portrait of how the global aviation infrastructure rises to meet the demand of international passengers.