Fifteen percent of students who responded to the Young Invincibles survey said they didn’t know loans that tack on interest would lead to payments beyond the original loan amount.

“I didn’t understand it at all,” said a student who owed $70,000. I figured that if I borrowed $10,000, then I’d have $10k to pay back later, and all I’d have to do is be frugal for a few years after I got a job to pay things back. I had no idea how much interest was bound to accrue over time. By the time I did understand it, I had racked up quite a lot of loans.”

More than half of college students said they didn’t think they could ever pay off their student loans. A student quoted in the survey said it was several years before he realized that submitting loan repayments well beyond the minimum amount would be the only way to pay down a loan quickly.

“Even when student loan borrowers understand the terms and conditions of their loan agreements on the surface, it is clearly difficult for some to process the whole picture,” the survey said. “On the one hand, they are acutely aware of the importance of obtaining a college degree, but on the other, it is difficult to anticipate what impact student debt will have on their lives after graduation, particularly in a difficult economy.”

Many survey respondents who took out federal loans said they understood the complexities of the loan application and repayment process before they gave their final approval. About one-fourth of students said they understood some part of the student lending process.


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