College students are borrowing more with fewer plans to pay back loans, according to a concerning new study conducted by EverFi, an education technology company.
“Even though respondents stated that they were anticipating borrowing more and more frequently, they had fewer plans for repaying those loans,” the study said. “In general, responsible planning behaviors decreased over time, but risky financial moves such as using payday lenders or taking out cash advances on credit cards, remained stable.”
From 2012 to 2014, the percentage of students at four-year colleges who followed a budget to limit their spending dropped from approximately 76 percent to 64 percent. Under half balance their checkbook, down from about 58 percent in 2012. The portion of students paying off loans and making loan payments on time also dropped from 2012 to 2014.
Interestingly, students at two-year colleges showed better financial literacy than their counterparts at four-year colleges. “Students from two-year institutions reported more experience with money management, less and smaller loans, and more responsible behaviors than their peers from four-year institutions,” the study said.
At four-year institutions, two-thirds of students had student loans, compared to 44 percent at two-year institutions. Although a quarter of two-year students live paycheck to paycheck, 60 percent use budgets. Sixteen percent of four-year students live paycheck to paycheck and 40 percent use budgets.
Roughly one in eight students at four-year colleges said they “don’t check their balances because they are too nervous,” while one in six said their parents manage their money for them.
The most commonly cited cause of financial stress for four-year students was finding a job after graduation, with two-year students slightly more worried about tuition hikes.
The study surveyed a sample of 42,000 college students at four-year colleges across the country at the beginning of the fall 2014 semester. Ninety percent of the participants were in their first year of college. One thousand students at two-year colleges were surveyed as well.
