The student loan debt crisis has grown into a full-blown pandemic, with potential repercussions that could destroy our economic recovery. To prevent financial disaster for the entire country, students should learn about debt management by improving their financial literacy. Here are some important facts that everyone looking to finance a college education needs to know.
College Students & Their Credit Cards
91% of undergraduate students hold at least one credit card, which is a 76% increase from the rates reported in 2004. The average number of credit cards per student was reported as 4.6, with over half of all college students holding four or more credit cards.
The average undergraduate student was reported to carry approximately $3,173 in credit card debt. The average college senior was projected to graduate with over $4,100 in credit card debt, which is a reported increase of 41% from the same study run in 2004.
92% of undergraduate college students use their credit cards to pay for college-related expenses, with 30% admitting that they use credit cards to pay for college tuition.
The average college graduate (from a four year university) was projected to amass nearly $20,000 in student loan debt.
25% of undergraduate students surveyed by US PIRG’s 2008 Campus Credit Card Trap study reported having paid late fees on their credit card bills, with 15% of them having paid an over the limit fee.
The Rising Costs of College Tuition
The average cost of college tuition at a private four-year school was reported to be $25,143 in 2008, an increase of 5.9% over the 2007 statistics. Costs have significantly increased since then.
The average cost of college tuition at a public four-year school was reported to be $6,585 in 2008, an increase of 6.4% over the 2007 statistics. Costs have significantly increased since then.
Student Debt Problems
A recent Duck 9 study reported that 7.2% of college students in the United States are forced to drop out of school due to overwhelming debt or other financial pressures.
Alarmingly, Americans between 18 and 24 years old were reported to spend nearly 30% of their monthly income just on debt repayments, which is twice as high as the percentage doing that in 1992.
College Students & Financial Literacy
The JumpStart Coalition study in 1997 reported that high school students lacked an understanding of even basic personal finance concepts, with survey participants answering only 57% of the questions correctly. Only 10% of respondents to this survey reported having learned about personal finance topics in school, with 60% reporting that they learned about them at home.
A 2007 Charles Schwab survey of teens and money reported that just 45% of them knew how to use a credit card, with only 26% of the teen responded beings able to prove that they understood how credit card interest rates and fees worked.
A 2009 Sallie Mae study reported that 84% of undergraduate college students admitted they needed far more financial management education. 64% of respondents said they would have liked to receive this training in high school, and 40% of them said they’d like to have received it as college freshmen.
In a Nutshell
College tuition rates and textbook prices are rising at alarming rates and financial literacy is not keep up the pace. College students are overspending on their education, driving themselves into significant debt, and building a bigger bubble than any that the United States has ever seen before. The collapse of this bubble could have serious consequences on both these students, and the general population of America.
Is College Even Worth It?
Yes. One 2007 College Board Study reported that people with a bachelor’s degree earned more than 60% more than workers who only held a high school diploma. Over one’s lifetime, the difference in wages between those with only a high school diploma and those with a college degree comes to more than $800,000.