According to a new study by Sallie Mae, a company that provides student loans and saving plans, the average undergraduate student now carries the most credit card debt since Mae began collecting the data in 1998. The average amount of debt is $3,173, as compared to $2,169 in 2004, which represents an increase of 46 percent.
The level of debt correlated strongly with grade level. Seniors had the highest debt, with an average of $4,138 per person, an increase of 44 percent since 2004, and freshmen had the lowest, at $2,038, an increase of 27 percent.
The study relied on data collected in March 2008. Since then, student loans have become increasingly scarce, as has the home equity that many families relied on to pay college costs.
At the same time, according to the Commonfund, college endowments had suffered an average loss of 24.1% by December, 2008. This leads to increases in fees and tuition costs.
According to the CollegeBoard, tuition is up 5.9% at private four year schools and 6.4% at public four year institutions since 2008. There are less private loans available for students, and although federal loans are still being handed out, state aid for institutions of higher education is drying up.
Now students are being forced to charge more of their educational expenses to credit cards; since 2004, there has been a 134% increase in the amount of money charged to student credit cards.
Edmund Mierzwinski, consumer program director for the U.S. Public Interest Research group, told USA Today that more “students are carrying more debt on credit cards, and more students are paying for education on credit cards.”
Simultaneously, the Chicago Tribune reports that it is becoming more difficult for students to qualify for credit cards, while interest rates have increased for most cardholders. This means that students and their families are being forced to shoulder increasing proportions of their college costs, in addition to credit card fees.
Emily Peters, a spokeswoman for Credit.com, an educational and how-to website, told the Wall Street Journal, that, for students, “the best possible option would be to leave the card dormant and use it every six months.”
Our Take
It seems like this pattern will continue indefinitely: the schools are forced to raise tuition costs due to the economy, forcing students to pay more, even while the recession takes away the loans and aid the students need to afford it. Institutions of higher education need more federal aid so that they can lower costs and reverse the cycle.
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