You may have heard NPR's report this morning about college's students' weird lack of information about their loans:
In fact, McWilliams isn't entirely sure what types of loans he's taken out — federal, private, subsidized, unsubsidized.I dare you to tell me this isn't a bubble.
"Actually, I don't remember," he laughs. McWilliams seems to take some strange pleasure, though, in knowing he's not alone.
"This is an expensive school, so a lot of people have debt here," he says. "They don't look too deeply into [the cost or debt], they just take the money."
The article goes on to focus on the lack of transparency at universities, when explaining the cost to students and the types of financial aid they are receiving. However, this ultimately boils down to a student---the person who signs the paper and is responsible for paying back the money---being only dimly aware of having taken out a mortgage-sized loan. Another quote from the article:
"So there's this horrifying moment at the end of your senior year in college when they put everyone in an auditorium, and they give you the piece of paper that says how much money you owe," Bickens says. "There's this collective gasp."Let me ask you something: how can you gasp in shock at the magnitude of a loan you already took out, years ago? How does one suddenly discover that he or she previously borrowed enough money to buy a house? How can you be so unaware of what you've borrowed, that this information has to be revealed to you years later? It's like they borrowed money in their sleep.
I can confirm this phenomenon first-hand, since part of my job is to advise college students. I make sure to ask students if they have loans, what kind and how much. Some kids know all about their loans: they are wary of debt, and have debts on the order of 10-20K. However, I also encounter kids who only know they have loans, and have no idea how much or what kind, or how much college even costs, much less specifics like the interest rate. Upon further inquiry, I always find these kids have borrowed shocking amounts of money, sometimes more than an entire full-ride to the university.
I strongly believe that we can reduce the student loan crisis a great deal simply by addressing this weird financial somnambulism, and forcing cognizance during the lending process. Education alone may not be the answer: we need to understand from a sociological or psychological standpoint how a student, otherwise smart enough to attend college, can borrow large amounts with only vague awareness of having done so.
As progressives, we naturally respond to a crisis by looking for flaws in our system (the lack of transparency, which must be fixed) or looking for bad actors, like lenders (whom we are trying to regulate); but the crisis is also made possible by a weird lack of awareness at the moment of signing. What causes this, and how do we stop it?