Student loan debt still surpasses credit card debt
In June 2010 student loan debt was $833 billion, compared to credit card debt of $826.5 billion. This was the first time student loan debt surpassed credit card debt, and it has not slowed down since. Credit card debt was $790.1 billion in April 2011 and has been declining since September 2008. Finaid.com projects that student loans could reach $1 trillion this year. According to Finaid, total student loan debt is increasing at a rate of about $2,853.88 per second.
CreditKarma.com conducts a monthly study on credit scores and trend data titled “U.S. Credit Score Climate Report.” In their recent April 2011 study, the average student loan debt per consumer was $29,572, an increase of six percent since April 2010. Sixteen states had higher than the national average student loan debt : Wisconsin (17%), Oklahoma (16%), Oregon (13%), Maryland (12%), North Carolina (11%), Massachusetts (11%), Minnesota (9%), Connecticut (8%), Georgia (8%), Indiana (8%), Tennessee (8%), Washington (8%), Illinois (7%), Kansas (7%), Kentucky (7%), and Virginia (7%). Four metropolitan statistical areas (MSAs) increased student loan debt by more than the national average including Boston, Kansas City, Miami and San Diego.
Reasons that student loans are increasing
- Cost of college tuition has increased
- Price of everyday goods and services have risen
- Parents are strapped for cash and don’t have the money
- Grants haven’t kept pace with the cost of education, more have to get loans
- Minimum payments for credit cards increased from 2% to 4%
- Lower credit card limits
- Tighter credit policy
- Consumers are spending less
- CARD Act does not allow credit card offers to those under 21 years of age
- Credit cards are dischargeable in bankruptcy and student loans aren’t
Students are faced with higher employment when they get out of college and long term student loans. This could delay leaving home, getting married and buying a home.
Getting a college education is still worthwhile and your income is on the average much higher than those with a high school diploma. If you are considering getting a student loan, try to borrow a little as possible. You don’t want to start out with a huge loan. Student loans stick with you for a long time and can’t usually be included in bankruptcy.
John Ulzheimer is the President of Consumer Education at SmartCredit.com, the credit blogger for Mint.com, and a Contributor for the National Foundation for Credit Counseling. He is an expert on credit reporting, credit scoring and identity theft. Formerly of FICO, Equifax and Credit.com, John is the only recognized credit expert who actually comes from the credit industry. Follow him on Twitter here.