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

Recent News

• Foreclosures on the Rise
  Foreclosures reached a record amount in the spring—the result of the collapse of the subprime mortgage market.[29th September 2007]


• Construction Activity Plummets
  The Commerce Department reports that construction activity plummeted in July—the largest decline in six months.[29th September 2007]


• Impact of Credit Crisis Appears Limited
  While the nation's credit crisis has had a devastating effect on the housing sector, its effects on other segments of the economy appear to be limited, according to the Federal Reserve.[29th September 2007]


• Ex-Fed Chief Concedes Mistakes in Forecasting
  The one-time head of the Federal Reserve admits that he didn't see the subprime crisis coming. [29th September 2007]


• Investor Confidence Wanes Amid Housing Troubles
  The chairman of the House Financial Services Committee says investor confidence is slipping in the wake of what has been described as the worst housing crisis in 16 years.[28th September 2007]


• Consumer Confidence Shows Signs of Weakening
  Consumer confidence showed signs of weakening in August—an apparent result of the ongoing housing crisis and the turbulent stock market. [28th September 2007]