College Class of ’09 to Graduate with a Major in Credit Card Debt

October 1st, 2008

The credit crunch continues to take its toll, and our tracking of the student credit card market indicates that many of this year’s seniors are facing a “perfect storm” of severe financial struggle after graduation. The convergence of higher student loan debt, student attitudes toward credit card debt, and a dim employment outlook are just some of the factors that will cause difficult circumstances for some graduating college students this year.

Government loans and grants have failed to keep pace with educational costs, and ten percent of student borrowers already rely on private loans to bridge the gap. The recent credit crisis has impacted the ability of students to obtain these private loans, however. Over the summer, more than two dozen lenders, including Bank of America, Citigroup and Wachovia, stopped or curtailed their private lending to students.

Separate studies by the American Council on Education and by U.S. PIRG both found that roughly 25 percent of student credit card holders used their cards to pay for some portion of their tuition. With major lenders now limiting the availability of private student loans, we may see that percentage of college students paying a portion of tuition on credit cards increase.

On top of this trend, student attitudes toward credit may also be a factor in increased credit card debt. More than 25 percent of college students think it is reasonable to use their credit cards as a means to raise cash, according to a recent National Association of Retail Collection Attorneys (NARCA) survey. The NARCA survey also revealed that 31 percent of those polled did not worry about college student credit card debt because they believed they could pay back outstanding balances once they were out of school and earning a regular paycheck.

This optimism may be ill-founded. Unemployment numbers for individuals between the ages of 16 and 19 – years that encompass a good portion of the college student population – rose steadily in May, June, and July – from 18.7 percent, to 18.1 percent, to 20.3 percent respectively. This means that many students were unable to earn income during the summer break, and the outlook for employment after graduation may be similarly bleak.

Students are using credit cards as a last resort to pick up the slack when they have difficulty getting loans or jobs to cover their expenses. With fewer loans and jobs available, more students may find themselves rich in knowledge, but deep in debt come graduation day.

For a copy of Kaulkin Ginsberg’s report The Student Market for Credit Cards: Issues and Trends, or for more information on college student credit card debt, visit the Free Reports section of


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