Student Debt On The Rise

By Staff
April 16, 2009

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

According to theNew York Times students who borrow for college graduate with an average debtof $22,700.  The recent stock market losses have not only made it harderfor families to pay for college, but reduced university endowments thatunderwrite scholarships and grants.  The financial problems are makingstudents and their families increasingly nervous.  Kevin McKinley is afinancial planner that helps students and parents save for college. He received his first-ever referralfrom a psychotherapist who thought his patient could reduce anxiety not bytherapy, but by seeing a financial professional. "That's not something thathappens when the markets are doing well," Mr. McKinley says.  One way tohelp save for college; use credit cards that reward the customer with refundsinto a 529 college savings account.

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

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