The New York Fed has been keeping an increasingly close eye on students loans, trying to understand how the more than $1 trillion in debt is affecting the wide swath of Americans who are borrowers. It recently added questions about student loans to its broad survey on consumer expectations, and a new analysis found that people don’t fully comprehend the ramifications of taking on student debt.
The survey covered 1,029 people, including those with and without debt. Only 28 percent 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 percent—incorrectly thought the government couldn’t do any of those things or said they didn’t know what the government could do. Only 37 percent 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.