Graduate Student Credit Spending on the Rise

[Oct 1, 2007.]

Credit card use among graduate students appears to be on the rise, according to a study by Nellie Mae, which provides educational financing for college students.

The company found that 90% of graduate students possessed at least one charge card last school year. The average outstanding balance was $8,612. That's a 10% increase over the $7,831 average balance in the year 2003.

Only about 1 in 5 graduate students pay off their balances each month. As a result, a number of students are carrying a phenomenal amount of debt, especially when compared to their household incomes. In some cases, grad students have been growing credit card debt since their undergraduate days—a disturbing trend, according to financial experts.

Nearly 95% of grad students are using their charge cards for books, school supplies, and transportation to and from school. A surprising number—one-third—rely on their cards to finance their school tuition. This, despite the fact that a credit card-financed education does not make financial sense, given the availability of student loans with lower interest rates. It may be that grad students are experiencing such a time crunch between academic and work responsibilities that they simply don't have the time to research alternatives to credit cards.

Business students carry the most debt, averaging an astounding $14,000. Some students may be falling into debt because they figure that they'll command a high salary once they graduate. But deficit spending can become addictive, and salaries may not be as high as recent graduates expect. As a result, a number of grad students may be in for a financial shock once they leave school. Credit card debt may, in turn, cause them to delay purchasing a home, getting married, or having children.

As a result of the situation, some observers are advocating better instruction in money management for undergraduates and graduate students alike.

Julie Ann Amos
October 1st 2007

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