A quarter of students say they don’t understand student loans: RBC

More than half (57%) of students are using or plan to use financial aid to fund their education, but only 28% say they’re confident they know how long it’ll take to pay off, according to poll results RBC released Tuesday.

In addition, a quarter reported low confidence in understanding how student loans work and only 30% said they knew the difference between student loans, student lines of credit and credit cards.

Students are at risk of making major financing decisions without a practical understanding of what different types of borrowing could mean for their long-term financial future, Lucianna Adragna, vice-president of client segments in everyday banking with RBC, said in an email. So, advisors need to start the conversation with client families and their children who are about to enter post-secondary education before they make borrowing decisions.

The conversation could include discussing repayment plans, living expenses that could increase the total cost of education and unplanned costs like rent increases, Adragna added.

Advisors can also highlight the differences between scholarships, student loans, lines of credit and credit cards and which funding source is suitable for what types of expenses, Sara Son-Hing, vice-president of personal lending, said in an email.

Furthermore, post-secondary education often coincides with personal financial milestones, like a first paycheque, credit card or investment account, and serves as an opportunity for financial education, Adragna noted. Advisors can help young people understand concepts like credit scores, interest and the value of savings habits for the long run.

These online survey conducted by Prodege between May 15 and 29 included 1,600 Canadians aged 17-24 who are prospective or current post-secondary students.

Jonathan Got

Jonathan Got is a reporter with Advisor.ca and its sister publication, Investment Executive. Reach him at jonathan@newcom.ca.