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Student Debt On The Rise

By CityTownInfo.com Staff
April 16, 2009

USA Today reports that university student credit card debt is rising as fees and tuition increase.  Sallie Mae, the nation's largest college financing company, reports that the average undergraduate carries over $3,000 in credit card debt, the largest amount since the company started tracking this data in 1998.  The debt increase accompanies a 50% rise in tuition and fees at public four year colleges over the last ten years.  At the same time, student lenders are reducing private loans, making credit cards an important source of student funding.  Credit cards are the "lender of last resort," says Kalman Chany, president of Campus Consultants, a college funding adviser. "If (students) can't get private loans, they turn to credit cards."

According to the New York Times students who borrow for college graduate with an average debt of $22,700.  The recent stock market losses have not only made it harder for families to pay for college, but reduced university endowments that underwrite scholarships and grants.  The financial problems are making students and their families increasingly nervous.  Kevin McKinley is a financial planner that helps students and parents save for college. He received his first-ever referral from a psychotherapist who thought his patient could reduce anxiety not by therapy, but by seeing a financial professional. "That's not something that happens when the markets are doing well," Mr. McKinley says.  One way to help save for college; use credit cards that reward the customer with refunds into a 529 college savings account.

The Chattanooga Times Free Press covers the Obama administration's proposal to eliminate subsidies to private banks for the purpose of encouraging them to make student loans. A revamp, the administration says, would save $94 billion that would go to needy student borrowers and could help even more people go to college. The federal government would contract for administrative services but keep the related job numbers intact.  Sallie Mae has already brought back 2,000 loan administration jobs that were outsourced to overseas call centers in 2007.

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