Financial Literacy Among College Students And Its Influence On Student Loans

Abstract

The rising cost of higher education has led to an increase in student loan borrowing, making financial literacy crucial for college students. This study examines the relationship between financial literacy and student loan borrowing behaviors among undergraduate students. Using a mixed-methods approach, the research explores how students' understanding of financial concepts such as budgeting, interest rates, and repayment terms influences their borrowing decisions and loan management. Quantitative data was collected through a structured questionnaire assessing financial literacy and borrowing patterns, while qualitative insights were gathered through semi-structured interviews. The findings reveal that students with higher financial literacy tend to borrow smaller amounts, demonstrating more cautious borrowing behavior. Additionally, students with greater financial knowledge express higher confidence in repaying loans. Regression analysis confirms that financial literacy significantly reduces borrowing amounts, while socioeconomic background also plays a role in borrowing behavior. Qualitative interviews highlight gaps in students' understanding of loan terms, the influence of peers on borrowing decisions, and the emotional stress associated with loan repayment, particularly among those with low financial literacy. The study underscores the need for targeted financial education interventions to enhance students' ability to make informed borrowing decisions and manage debt responsibly. The research also emphasizes the potential role of digital tools in supporting financial literacy among students. By addressing the financial literacy gap, educational programs can help mitigate the risks associated with student debt and promote long-term financial well-being.