(NEW YORK, NY) This week, Sallie Mae published a new report showing a massive increase in credit card debt among college students over the last four years. The study, entitled "How Undergraduate Students Use Credit Cards: Sallie Mae's National Study of Usage Rates and Trends, 2009" showed that, as educational expenses and costs of living rose while student aid continued to drop, more students relied on their credit cards to pay for college expenses.
In response, Tamara Draut, Vice President of Policy and Programs at Demos, a national research and policy center which studies the economic concerns of young adults and the rise of debt in America, and author of the book "Strapped: Why America's 20-and 30-Something's Can't Get Ahead," issued the following statement:
"The report published this week by Sallie Mae, the nation's largest student loan provider, captures a disturbing rise in credit card debt, much of it fueled by the rising cost of college and an anemic financial aid system that can't keep up.
"This study reveals a large increase in the level of student credit card debt since 2004, with the average indebted senior now carrying over $4,100, a 44 percent increase, while the average freshman in 2008 had accumulated over $2,000 debt. In a 'Debt for Diploma' system that already saddles college graduates with over $20,000 in student loan debt, the evidence of increased credit card debt further confirms that college costs are leaving this generation with a heavy debt burden.
"The reasons for this massive debt increase are manifold: Adjusted for inflation, college tuition at the average 4-year institution has increased 35% in the last five years alone. The Sallie Mae report reveals that more students are using their credit cards to cover the direct costs of college. In fact, 30 percent put tuition on their credit card, up from 24 percent in 2004, and 92 percent of undergraduates with credit cards charged textbooks, supplies, and other expenses, up from 85 percent in 2004. And the average charges related to direct college costs more than doubled from 2004 to 2008, from $942 to $2,200.
"Fortunately, there is currently Federal momentum to enact crucial credit card industry reform as well as modernization and expansion of federal student aid programs.
"These include The Credit Card Accountability, Responsibility and Disclosure Act, or 'the Credit CARD Act', introduced by Senator Dodd (D-CT) last month and the Credit Cardholder's Bill of Rights Act, introduced by Rep. Carolyn Maloney (D-NY), which would put an end to some of the most abusive practices of the credit industry, including aggressive marketing of credit cards to the young. The Sallie Mae report underscores the need for such reform, and for increasing scrutiny of predatory and capricious credit card practices.
"We also have in the President's budget a foundation for many of the key reforms needed to ensure greater access to funding for higher education and making loans more affordable over the long term, such as moving to a Direct Loan program and expanding grant-based aid.
"These are currently under consideration by Congress, and deserve serious attention."