March 31, 2023

Gen Z Is Overly Optimistic About Student Loans

The accuracy of Gen Z’s expectations are mixed when it comes to college costs.

Knowledge may be power, but it’s also expensive, so expensive that more than a third of Gen Zers expect to carry $50,000 or more in debt for their bachelor’s degree.

A survey of more than 8,000 high school and college-aged students from the scholarship search site Scholarship Owl found that the overwhelming majority expect to carry student loan debt after graduation. However, most underestimate exactly how long it will take them to pay off their education.

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Gen Z is realistic about the cost of higher education: 90% said they expect to owe money when they graduate, and 36% expect to owe a whopping $50,000 or more for a bachelor’s degree.

As for the length of time Gen Zers think they’ll be on lenders’ hooks, most think they’ll pay off their loans within 10 years.

When it comes to the cost of their education, the accuracy of Gen Z’s expectations are mixed. While the majority is correct in assuming that they’ll owe money after graduating, the actual number of graduates with student debt is much lower than 90%.

According to the think tank Urban Institute, 70% of students who receive a bachelor’s degree have education debt when they exit college. It’s not likely that will increase to 90% by the time Scholarship Owl respondents graduate.

There are about 44 million people in the U.S. who currently carry student loan debt, and most of them (92%) have federal loans to pay off.

As for the amount they’ll owe, some of the 36% of Gen Zers who estimate having to pay off at least $50,000 probably won’t have as much debt as they expect. While some undergraduates do borrow that much, it’s far from the norm.

Gen Zers are also underestimating how long they’ll be paying lenders. According to an analysis of government data by financial aid expert Mark Kantrowitz, the average student takes about 16 to 19 years get out from under their debt, not 10.

Gen Zers know they’ll owe money after they graduate, and a significant portion expect they’ll owe quite a bit. But they’re much too optimistic about when they’ll be free from monthly student loan payments, which Scholarship Owls says makes them unprepared for what their financial circumstances will look like in the future.

March 31, 2023 5:12am