Did you know that February is Financial Aid Awareness Month?

In the spirit of Financial Aid Awareness Month, we conducted a survey of 500 current college students and asked them 16 general questions related to the financial aid process.

Go to any college campus, find a student, and they can ramble on about a tricky subject like psychology, physics, or biomedical engineering. Now ask the student to educate you on everything related to financial aid. You will walk away from that conversation having learned little. Financial aid is something that has a direct and lasting impact on the lives of students; their lack of knowledge on the subject is alarming.

There is no doubt that getting a degree is helpful and may reap huge benefits. However, it concerns us here at LendEDU that students do not understand how they are funding their education.

When the average student receives his or her college diploma, they are also walking away with $28,400 in student debt. That is a pretty large sum of money. Add in the fact that students know very little about how to handle that debt, and that number becomes even more intimidating. In a study we did last year, we found that 85% of students rely on their parents to deal with financial aid and student loan information, yet most parents don’t even understand the process.

This survey confirmed college students are struggling to understand the financial aid process. The full results of our survey are quite eye-opening. In total, we asked 16 questions related to financial aid, which are immediately below this. We hope that you read the entire survey and the Observations & Analysis section at the end of this report.

LendEDU’s Financial Aid Awareness Survey

1. Have you heard of the FAFSA?

90% of college students reported that they had heard of FAFSA.

2. Do you know the deadline to file the FAFSA for the 2017-2018 school year?

84% of college students could not identify the correct filing deadline for the FAFSA.

3. How much does it cost to file the FAFSA for the 2017-2018 school year?

16% of college students did not know how much it costs to file the FAFSA. Filing the FAFSA is free, but unfortunately, 16% of respondents reported a filing cost.

4. Do you know what FAFSA stands for?

78% of college students could not identify what FAFSA stands for.

5. What is included in the Expected Family Contribution (EFC) formula for the 2017-2018 school year?

42% of college students could not identify the components included in the EFC formula.

6. What is included in the Cost of Attendance (COA) formula for the 2017-2018 school year?

75% of college students could not identify the components included in the COA formula.

7. Do you know the difference between subsidized and unsubsidized student loans?

33% of college students could not identify the differences between subsidized and unsubsidized loans.

8. What is the maximum Pell Grant award for the 2016-2017 award year?

80% of college students could not identify the current maximum Pell Grant award for the 2016-2017 award year within a +-15% margin of error.

9. What is the current interest rate on new undergraduate federal subsidized and unsubsidized student loans?

80% of college students could not identify the current interest rates on undergraduate federal subsidized and unsubsidized student loans.

10. Do you know the current repayment term of a federal student loan?

79% of college students could not identify the current repayment term of a federal student loan.

11. Do unsubsidized student loans accumulate interest during deferment?

When asked, 44% of college students did not know unsubsidized student loans accumulate interest during deferment.

12. Do subsidized student loans accumulate interest during deferment?

When asked, 57% of college students did not know subsidized student loans do not accumulate interest during deferment.

13. Do you know the current federal student loan borrowing limit?

74% of college students could not identify the current federal student loan borrowing limits, relative to their current educational standing.

14. Can Parent PLUS loans be transferred to you (the student) after you graduate from college?

57% of college students did not know that Parent PLUS loans cannot be transferred to the student after graduating college.

15. Do you believe that you will be helped by federal student loan forgiveness programs after graduation?

When asked, 49.80% of college students believed they would in fact be helped by federal student loan forgiveness programs after graduation.

16. Is it possible to refinance student loan debt with the federal government?

When asked, 64% of college students incorrectly believe that it is possible to refinance student loan debt with the federal government.

Observations & Analysis

Students Do Not Know Basic FAFSA Facts

Unfortunately, from our data it appears that students do not know enough about the FAFSA. Most alarming, 16% of current college students believe that you need to pay money to file the FAFSA. This is false! We hope that these students and families do not fall victim to one of many FAFSA scams.

10% of students have never even heard of FAFSA. While this is a low number, it should be even closer to 0% given the monumental importance of filing the FAFSA.

84% of college students did not know when the deadline was for the FAFSA for the 2017-2018 school year. Most students have heard of the FAFSA, but if 84% do not file it on time it becomes a useless tool.

Students Struggle to Understand Basic Financial Aid Information

This survey provides evidence that students are struggling to learn financial aid information.

For example, 42% of respondents did not know which field of information was not included in the Expected Family Contribution (EFC). Additionally, 75% of college students did not know which fields were not included in the Cost of Attendance (COA). These two snippets of information support one of our previous studies, which showed that students almost entirely rely on their parents in filing for financial aid.

A whopping 80% of college students could not identify current federal student loan interest rates within 50 basis points. And, 79% of college students did not know that 10 years was the current repayment term. Finally, 74% of college students did not know the current federal student loan borrowing limits. Moreover, these students could distinguish between private education loans and that offered by the Department of Education. Interest rates, repayment terms, and borrowing limits are three integral components to calculating the long term cost of student debt. It is concerning that current college students are underestimating the cost of student debt today and tomorrow.

Students Overestimate Post-Graduate Repayment Benefits

One of the more interesting trends was that college students are overestimating federal student loan repayment benefits.

Roughly 50% of respondents believed that they would be helped by federal student loan forgiveness programs after graduation. In reality, a very small percentage of graduates will even qualify for Public Service Loan Forgiveness. It is worrisome that current students may be over borrowing on the hope that their student debt will be forgiven in the future.

The second piece of evidence that points to this overestimation of federal student loan repayment benefits can be seen in the last question. 64% of college students believe it is possible to refinance their student loan debt with the federal government as opposed to private student loan consolidation. Right now, and for the considerable future, there is not a federal refinancing program in place. Again, it is worrisome that current students may be incorrectly predicting the long term cost of their debt.

See more of LendEDU’s Research