Financial education is the key to reducing stress related to student loans

It is estimated that a quarter of American adults currently have student loans to repay and that most of them do not have the financial knowledge to successfully manage their debts. The average student in the 2016 promotion has $ 37,172 in student loan debt. University of Missouri graduates have an average debt of $ 21,884.

In a new study, Lu Fan, an assistant professor of personal financial planning at the University of Missouri, revealed that borrowers are not receiving adequate education to manage their student debt. She suggests that much remains to be done to educate borrowers about debt management and the various repayment options that may be available to them.

"A majority of borrowers, 55 percent, said they were worried about their student loans, but only 30 percent of borrowers said they received financial education to pay off their student loans," Fan said. "In addition, only 40% of borrowers reported having a financial influence from their parents.With the number of people who need student loans to continue their education, we need to better educate our borrowers."

Using the National Financial Capability Survey dataset of 2015, Fan and Swarn Chatterjee, a professor at the University of Georgia, discovered that having a debt of $ 40 million was a major problem. student loan caused mental stress to borrowers. The researchers examined more than 2,600 responses from the data set, focused on respondents with a student loan, aged 24 to 65, who were no longer students, who had a job and who were were the main decision makers in their household.

The researchers found that women were less likely to be late on their student loan payments, but were more likely to worry about their student loans. Men were less worried about their debt and more likely to submit late payments. They also found that borrowers who had not completed their education were more likely to repay their loans than those with a degree.

Fan believes that borrowers do not receive the information they need to make the best financial decisions and that policy makers and loan providers should do more to educate borrowers.

"My hope is that policymakers use this information when developing financial education programs," she said. "Better educational resources created for specific audiences – parents, young adults, women and households whose income has fallen – will lead to more educated borrowers"

Explore further:
New report details the experiences of graduates with student debt during the Great Recession

More information:
Lu Fan et al., Financial Socialization, Financial Education and Student Loan Debt, Journal of Family and Economic Issues (2018). DOI: 10.1007 / s10834-018-9589-0