College Student Credit Use Rising

Submitted by jvholloman on Mon, 04/20/2009 - 02:18

I know that last time I said my next post would take a closer look at credit counseling services, and I actually have two posts ready to go on that subject, but I saw an article today that caught my attention. After reading it I decided to post about it instead.

It seems that in these tough financial times, college students are turning to credit like never before. The average student debt for an undergrad, according to the ginormous student lender Sallie Mae, currently stands at $3,173. That's up a whopping 46% since 2004. That's right, only since 2004.

Graduating seniors owe even more, $4,100, and that amount only goes up from there fore grad students. Several reasons were given, from rising college costs, to job loss, to complex loan rules that force students to credit cards, to flat out bad financial decisions.

Sallie Mae also pointed out several alarming trends. In 2004, 69% of freshmen carried no debt. Now that number is down to only 15% and the average freshman debt is nearly triple what it was in 2004.

Perhaps the most alarming part of the study was the revelation that nearly 60% of students were surprised about how high their credit card balances were. Add to that the 40% of students who admitted to charging items they knew they couldn't pay for and a disturbing picture is emerging for the future of credit management on US campuses.

Let me say that this study only dealt with credit card debt. When you add in the student loan debt that many of these students are also incurring, the numbers can be crippling for individual students as they move on to real life and begin their careers and their debt repayment.

The numbers speak to yet another generation of college students graduating in worse financial shape than their predecessors, and with dimmer prospects for good employment, at least in the short term. Students have to realize that they can't continue to borrow money for the short term and not suffer long term consequences. And the funny thing is that while the economic downturn has tightened credit significantly for people who are employed and have a track record of successful credit management, it seems that people with no real credit history or job have even more access to easy credit.

The credit card companies know that if they hook them while they are young, they have a slave for life.

Next up is the two post series on credit counseling services, I promise.