Knowledge and Attitudes

Despite this clear result suggesting that many students default because they cannot repay their loans, post-education earnings were not the only correlate of default in any of the empirical studies. Two other factors seem to be that borrowers are either confused about their repayment obligations or that borrowers simply refuse to repay. Many students are relatively young and, therefore, without long experience in credit relationships. Their knowledge about student financial assistance seems to be quite limited. In British Columbia, “[a] 1991 survey of 3,500 high school completers and first year post-secondary students reported that approximately half of the participants were dissatisfied with their knowledge of student financial assistance.” Some of the borrowers’ confusion about student borrowing may be related to the nature and circumstances in which it occurs. The process of applying for, and receiving, student financial assistance is closely linked with the process of attending school, rather than being a separate and discrete activity. Unlike consumer loans, student loans are not tied directly to the purchase of tangible consumer goods and no repayment is demanded until the end of full-time studies. Indeed, there is little contact with the lender for potentially long periods while the student is engaged in full-time studies. As a result, some students may not even know (or may not remember) that part of their financial aid package was, in fact, a loan that must be repaid. According to what little has been written on this subject, many students are unaware of the details of their borrowing, and some students are even unaware that they are borrowing. As Judy Dyck wrote: The transition into loan repayment may also be mysterious to students. After leaving school, borrowers must make arrangements with the lenders to consolidate their loans and to begin repayment. Many borrowers never make such arrangements and quickly fall into default.
The University of Alberta Students’ Union wrote that “[l]ittle information is provided to students regarding the consolidation process. In fact, [most] students only realize the commitment and what exactly the repayment structure means [when] they are consolidating [their] loans.”
Another common perception is that borrower attitudes are related to student loan default. Despite that perception, there has been no systematic study of borrower attitudes toward student loan default.

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