With millennials famously drowning in student loan debt, you may not be surprised to learn how little we know about how any of it works.
Thankfully, like many failings of our generation, we can blame this on our parents. 😅
The vast majority — 85% — of students rely on their parents for student loan information, LendEdu found in a survey last year. In a new survey released this week, the company learned parents really don’t know any more than their kids.
What Nobody Knows About Student Loans
LendEdu surveyed 1,001 parents with at least one child in 11th or 12th grade or in college. It included 17 questions to test parents’ knowledge of student loans.
The results don’t inspire confidence.
1. Nobody knows what a FAFSA is.
While 75% of parents had at least heard of the FAFSA, only 15% could correctly state what it stands for. Unfortunately, less than 2% of students could translate the acronym last year.
FYI, it’s “Free Application for Federal Student Aid.”
2. Few people know the difference between subsidized and unsubsidized loans.
Just over half (56%) of parents knew the difference between these loans, which isn’t too bad.
And only about 7% of students knew, which is abysmal.
Here’s the scoop: Unsubsidized loans accrue interest while you’re in school, during your six-month grace period before payments are due, and during any periods of deferment.
Subsidized loans do not.
3. Nobody knows who qualifies for student loan forgiveness.
Almost half (48%) of parents believe their child will benefit from federal student loan forgiveness programs after graduation.
Either these parents don’t understand the programs, or a lot of parents have high hopes for their kids going into public service.
Student loan forgiveness is available to a limited group of people who work in nonprofit or government jobs. You need to make 120 monthly payments toward your loans while working a qualifying job before you qualify for loan forgiveness.
That means working in a nonprofit or government job (or several) for at least 10 years and consistently paying down your debt in that time.
I wouldn’t count on it, parents.
4. Parents don’t understand parent PLUS loans.
A troubling 41% of parents believe they can transfer a PLUS loan to their child after graduation.
Even though the loan pays for the student’s college, it’s in the parent’s name — and the parent remains responsible for repaying it.
How Much Do You Know About Student Loans?
How do you stack up against the parents and students in these surveys?
If you find yourself among these uninspiring statistics, catch up! Read our comprehensive guide to student loans, so you — and your kids — are up to speed.
Your Turn: Are you surprised by how little parents know about student loans?
Dana Sitar (@danasitar) is a staff writer at The Penny Hoarder. She’s written for Huffington Post, Entrepreneur.com, Writer’s Digest and more, attempting humor wherever it’s allowed (and sometimes where it’s not).