NEW YORK–While a majority of former college students have comparison-shopped for cars, clothes or insurance, just 8% said they did so when it came to finding an education loan, according to a new survey that also probed for future spending plans and loyalty to financial institutions.
The survey of more than 1,000 U.S. adults who have attended college looked at the relationship to debt across three age groups and revealed considerable misinformation about student debt, reports LendKey Technologies, which commissioned the survey that was carried out by YouGov.
The Findings
Among the findings:
- Across age and gender lines, few respondents said they had searched for the best rate and terms for a student loan, with just 16% of those 18-34, 9% of those 35-54 and 3% of those 55 and older having “shopped around.” By contrast, two-thirds overall comparison-shopped for cars, 60% for insurance and 57% for vacations.
- The data indicate students need greater understanding of the student loan process: 41% said they believed loans come from schools themselves, while 14% incorrectly guessed angel investors are providing loans to the public. One-in-five guessed that private and individual investors provide loans, which is partially true, while almost two-thirds correctly answered that large banks offer student loans. Only half of former or current students correctly said credit unions offer student loans.
- The survey found Millennial and Gen Z borrowers were more likely than older peers to believe a government program will eventually relieve their burden. Thirty-seven percent said they were hopeful, compared with 31% of those 35-54 and 29% of those 55+. Overall, about half (47%) are skeptical about such proposals. A substantial number, 19%, said they do not know enough about the topic.
“Far too few consumers take the time to educate themselves about student loans, despite the fact that they may incur thousands of dollars in unwarranted education loan interest that may impact their financial future for years, perhaps decades, to come,” said Vince Passione, CEO and founder of LendKey, in a statement. “This is one of the few asset classes where consumers have not been taught to shop around.”
Additional Findings
The survey also looked at spending priorities and the future outlook for those holding student debt. Only 6% of those surveyed agreed with the statement “my generation is more frugal than older and younger generations.” But when asked to list ways in which they would spend a $35,000 windfall, 38% said one of their priorities would be to apply the funds toward a new home, while 33% included saving the money for retirement among their priorities. A roughly equal percentage (35%) prioritized paying down student debt.
Only 13% of respondents said they would use the money to buy a luxury car, while 19% said they’d consider taking the vacation of a lifetime.
Respondents also were unsure how much cash they’d need to put down in order to feel comfortable buying a house. One-in-five said they didn’t know, including 29% of Millennial and Gen Z respondents. Only 23% said they’d be comfortable putting down more than the standard 20% down-payment for a traditional mortgage.
FI Loyalty Increases with Age
As a useful insight to financial institutions appealing to the unbanked generation, the LendKey survey found loyalty increases with age: Millennial and Gen Z respondents were less likely (42%) than those 35-54 (52%) or 55+ (57%) to consider themselves loyal to the institution that holds their primary checking account. Women were slightly more loyal to banks than men (54% versus 49%). Overall, 52% of respondents said they were loyal and 37% said they were not, the company reported.
“Despite the growing emphasis on technology and mobile banking to improve customer experience, only about one in five cited technology as a motivation for switching banks,” LendKey said of the findings. “Better fees and interest rates would entice 57% of consumers to switch, followed by customer service (39%). Given the highly publicized data breaches at banks and other institutions, cybersecurity was cited as a primary migration factor by more than a quarter of respondents.”
Big Tech & Marriage
The survey also found:
- 61% of respondents would not turn to Google or Amazon for their banking needs. That includes half of Millennial and Gen Z respondents, 55% of Generation X and 71% of those over 55. Overall only 11% said they would bank with Google and 12% with Amazon.
- Student loans are affecting young adults’ relationship decisions. About one-third of respondents between 18-34 said they might postpone marriage — or had already done so — until student debt is paid off. That number shrank among older respondents, with 17% of those 35-54 and 10% of those 55+ (the latter least likely to hold student debt.)
One-third of Millennial and Gen Z respondents said student or credit card balances could affect their choice of a spouse, depending on the sum, though only 4% said debt was a deal breaker. Forty-five percent across age groups, however, said love conquers all and debt would not factor into marital decisions.