Price and college affordability continue to be two of the most important considerations for students and families in choosing where to enroll, but many prospective college freshmen have minimal understanding of the financial aid options available to them, according to a new report from ACT’s Center for Equity in Learning.
The report, which shares the results of a survey of 1,200 11th and 12th graders who recently registered to take the ACT® test, uncovered that the participants' knowledge of the financial aid process was "shockingly low" and that 36% were averse to taking on any amount of debt to pay for college. This aversion to student loans may stem, in part, from a lack of understanding of the types of loans available. Between 73% and 81% of those surveyed, depending on family income, weren't aware that there was a subsidized loan option available in which the federal government pays the interest accrued while students are enrolled.
Knowledge of repayment options was also lacking, with 67% to 70% of those surveyed, depending on family income level, reporting they were unaware of income-based repayment plans that could help to make their loan repayments more manageable following college graduation.
Overall, 20% of survey participants reported that they intended to pay for college without any assistance from their families, with higher percentages among first-generation college students and black students, at 31% and 27%, respectively.
"These are the two biggest groups who report such a high level of expecting to pay tuition without support, yet these are exactly the students who need the biggest boost," said Jim Larimore, chief officer for ACT's Center for Equity in Learning, in a press release.
While nearly 70% of respondents indicated that price was a very important factor in choosing a college, the resources students used to find information about paying for college varied a great deal. Students from families with higher incomes that were not as averse to taking on debt relied more heavily on parents and friends as their sources of information, while students who intended to pay for college without help from their families tended to turn to the internet and high school staff for information, which, the report noted, “may not be as up-to-date, personalized, or accurate as other means to fully inform these students.”
College representatives, such as financial aid administrators, were one of the least likely sources of information about how to pay for college among those surveyed, with only 40% of Pell Grant-eligible students and 46% of students who intended to pay without parental assistance reaching out to prospective colleges for information.
“Students from higher-income families who are not averse to college-based debt are more likely to indicate meeting with college representatives than all other students,” according to the report.
"The findings highlight an urgent need for more financial literacy-specific interventions, especially in light of the economic stakes at hand," Larimore said in a statement.
To improve awareness and understanding of available means by which to pay for college, the report’s authors suggested that information should be better tailored to suit the needs of different student groups—for instance, debt-averse students may need additional information about the different types of loans available and the value of taking on manageable amounts of student debt—and that “colleges need to improve their outreach to the students who could use their assistance and advice the most.”
Publication Date: 6/27/2019