Credit card debt has skyrocketed in America in recent years, with many of those chickens coming home to roost in the current recession. But its not just consumers buying groceries, gasoline and big screen TVs that have run up those bills.
A new report by Sallie Mae, the nation's largest student loan provider, shows a massive increase in credit card debt among college students over the last four years. The study, entitled "How Undergraduate Students Use Credit Cards: Sallie Mae's National Study of Usage Rates and Trends, 2009," showed that more students relied on their credit cards to pay for college expenses.
According to the study, the average credit card debt carried by a college senior last year was $4,100, a 44 percent increase since 2004. The average freshman in 2008 had accumulated over $2,000 debt. And thats just credit card debt, it doesn't count student loans, which are often $20,000 or more by the typical student graduates.
What's behind the increase in plastic debt? Tamara Draut, Vice President of Policy and Programs at Demos, a national research and policy center which studies the economic concerns of young adults and the rise of debt in America, and author of the book "Strapped: Why America's 20-and 30-Something's Can't Get Ahead," says there are several reasons. For starters, college keeps getting more expensive.
"Adjusted for inflation, college tuition at the average four-year institution has increased 35 percent in the last five years alone," she said.
According to the College Board, tuition is up 5.9 percent at private four year schools and 6.4 percent at public four year institutions since 2008. There are fewer private loans being made to students, and although federal loans are still being handed out, state aid is limited as the states are forced to tighten their belts.
The Sallie Mae study reveals that more students are using their credit cards to cover the direct costs of college. In fact, 30 percent put tuition on their credit card, up from 24 percent in 2004, and 92 percent of undergraduates with credit cards charged textbooks, supplies, and other expenses, up from 85 percent in 2004. The average charges related to direct college costs more than doubled from 2004 to 2008, from $942 to $2,200.
