National study released this year by Sallie Mae, one of the country’s leading student-loan providers, found that undergraduates’ credit card balances are the highest they have been since the company began conducting the study in 1998.
College students had an average credit card debt of $3,173 last year, with seniors graduating with an average debt of $4,100. Direct educational expenses, such as tuition, textbooks, school supplies and commuter costs, accounted for much of this debt: Nine in 10 undergraduates reported using their credit cards to pay for these items.
“Some of the results of the study are alarming, and we would caution students to avoid carrying credit card debt,” said Michael Kim, vice president of student services for the University of Southern California Credit Union. “Unless they have the means to pay off the credit card balance at the end of the month, they face significant finance charges that they will likely be paying off for many, many years after graduation.”
The nation’s economic recession has likely contributed to this increase in credit card debt by hampering many parents’ ability to fund their children’s pursuit of higher education, said Karen Klugh, communications manager for the American Financial Services Association.
“Because we’re in a recession, and it’s tough economic times all around, students aren’t getting as much help from their parents, so they’re having to undertake a lot more themselves,” she said.
Shouldering these educational costs often involves using credit cards, which have become the primary method of conducting transactions in the U.S. and conveniently allow students to get their hands on needed supplies without having to pay up front, said Kalman Chany, president and founder of Campus Consultants, a company that provides students and parents with financial aid advice.
“In some ways, having credit card debt can be beneficial, but you want to try to avoid getting to the point where you’re only paying the minimum, because that’s a slippery slope that’s hard to get out of,” Chany said.
Many USC students who carry credit card debt said they try as best they can to keep it under control, but rising educational costs and personal expenses, such as food, rent and gas, have made this task more difficult.
“Being in school and having no liquid income is hard. That’s what creates the debt,” said Christopher Fernandez, a third-year graduate student studying theatre.
Arpit Kadakia, a junior majoring in accounting, said the combination of increased expenses and personal spending habits has impacted his credit card debt.
“Expenditures keep going up, and my credit card balance is higher than I’d like it to be because I sometimes spend more than I earn,” he said.
Chany, who wrote a book on financing education for the Princeton Review called “Paying for College Without Going Broke,” said students can control their debt by using their credit cards only when absolutely necessary, creating a budget to track where their money is going and eliminating gratuitous expenses.
Jonathan Pack, a junior majoring in business administration, said he keeps his spending under control by carefully considering the value of his purchases.
“Personally, I think I manage [money] really well, and I try to make sure I don’t spend any money on anything I don’t need,” Pack said. “I do everything as cheap as I can but still have it be of good quality.”
Carolyn Zeller, a third-year graduate student studying theatre, said she has managed to avoid significant credit card debt by only using her card for emergencies, but said she still has trouble sticking to her monthly budget.
“My own personal bank account has very little income, but I have to pay for a lot at school, so it’s not always guaranteed it’ll be under [budget]. I think I manage [money] pretty well, but when it’s over what I’d spend, that’s when it gets complicated,” Zeller said.
Ultimately, maintaining a small credit card balance to build a good credit score is a wise move, Kim, Chany and Klugh said. Students should also increase their financial literacy by educating themselves about the basics of debt and how best to manage and avoid it, they added.
“Credit card usage should always be limited,” Kim said. “We often say th at students need to live like students today or else they face living like students after graduation because they’ve burdened themselves with huge amounts of debt.”
“Some of the results of the study are alarming, and we would caution students to avoid carrying credit card debt,” said Michael Kim, vice president of student services for the University of Southern California Credit Union. “Unless they have the means to pay off the credit card balance at the end of the month, they face significant finance charges that they will likely be paying off for many, many years after graduation.”
The nation’s economic recession has likely contributed to this increase in credit card debt by hampering many parents’ ability to fund their children’s pursuit of higher education, said Karen Klugh, communications manager for the American Financial Services Association.
“Because we’re in a recession, and it’s tough economic times all around, students aren’t getting as much help from their parents, so they’re having to undertake a lot more themselves,” she said.
Shouldering these educational costs often involves using credit cards, which have become the primary method of conducting transactions in the U.S. and conveniently allow students to get their hands on needed supplies without having to pay up front, said Kalman Chany, president and founder of Campus Consultants, a company that provides students and parents with financial aid advice.
“In some ways, having credit card debt can be beneficial, but you want to try to avoid getting to the point where you’re only paying the minimum, because that’s a slippery slope that’s hard to get out of,” Chany said.
Many USC students who carry credit card debt said they try as best they can to keep it under control, but rising educational costs and personal expenses, such as food, rent and gas, have made this task more difficult.
“Being in school and having no liquid income is hard. That’s what creates the debt,” said Christopher Fernandez, a third-year graduate student studying theatre.
Arpit Kadakia, a junior majoring in accounting, said the combination of increased expenses and personal spending habits has impacted his credit card debt.
“Expenditures keep going up, and my credit card balance is higher than I’d like it to be because I sometimes spend more than I earn,” he said.
Chany, who wrote a book on financing education for the Princeton Review called “Paying for College Without Going Broke,” said students can control their debt by using their credit cards only when absolutely necessary, creating a budget to track where their money is going and eliminating gratuitous expenses.
Jonathan Pack, a junior majoring in business administration, said he keeps his spending under control by carefully considering the value of his purchases.
“Personally, I think I manage [money] really well, and I try to make sure I don’t spend any money on anything I don’t need,” Pack said. “I do everything as cheap as I can but still have it be of good quality.”
Carolyn Zeller, a third-year graduate student studying theatre, said she has managed to avoid significant credit card debt by only using her card for emergencies, but said she still has trouble sticking to her monthly budget.
“My own personal bank account has very little income, but I have to pay for a lot at school, so it’s not always guaranteed it’ll be under [budget]. I think I manage [money] pretty well, but when it’s over what I’d spend, that’s when it gets complicated,” Zeller said.
Ultimately, maintaining a small credit card balance to build a good credit score is a wise move, Kim, Chany and Klugh said. Students should also increase their financial literacy by educating themselves about the basics of debt and how best to manage and avoid it, they added.
“Credit card usage should always be limited,” Kim said. “We often say th at students need to live like students today or else they face living like students after graduation because they’ve burdened themselves with huge amounts of debt.”
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