What Most Americans Don't Know About Student Debt

Now that student loans, well over $1.1 trillion, are hitting fresh record highs as... well... daily as the S&P500, the Fed is finally getting concerned about the latest debt bubble it has blown (not so much in equities). So concerned, in fact, the New York Fed recently added questions about student loans in its broad survey on consumer expectations to find out what people knew, or rather, did not know about this record debt mountain. We hope it was not shocked to learn that once again the bulk of Americans are taking on unprecedented amounts of debt without having a clue what the conditions are: accordint to the analysis, people don’t fully comprehend the ramifications of taking on student debt.

As Bloomberg summarizes , the survey covered 1,029 people, including those with and without debt. The shocking findings:
Only 28% of respondents knew that if student loans aren’t repaid, the U.S. government can garnish wages, withhold Social Security payments and tax refunds, and report the debt to credit bureaus.
Even more people—35%—incorrectly thought the government couldn’t do any of those things or said they didn’t know what the government could do.

Only 37% of those surveyed knew that students loans are extremely hard to shed in bankruptcy, a reality that differentiates student loans from other debts, such as mortgages and credit cards.

The survey found that people who have student loans know more about the consequences than those who don’t, and that’s even truer of those who have high debt loads. But about half of those with higher-than-average student debt didn’t have high comprehension of the issue.

The survey also found that fewer than one in five people under 55 years old were “highly literate” on the topic, even though they make up most current and future borrowers.

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