August 06, 2010
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News: US Student Loans Outweigh CC Debt
Individuals looking to acquire a higher education are finding themselves deeper in debt than students of the past. According to a recent report by the Federal Reserve and the FinAid.org, the overall U.S. student loan debt has surpassed the U.S. credit card debt. According to the Federal Reserve's June report, Americans owe nearly $830 billion to private financial institutions and the U.S. government. The FinAid.org reports that the overall national credit card debt stands at $827 billion. This is the first time in history that Americans owe less on credit card debt than student loan debt. Most likely it is the result of American's quest to reduce card spending and break away from high interest and fees.
The rise in student loans and decline in credit card debt came unexpectantly by most Americans. Mark Kantrowitz of FinAid.org did a good job of explaining how it occurred. He said it's like cooking a lobster; slow and steadily. Additionally, he said that "by the time you notice" the boiling water, you're cooked. Also contributing to the rise in outstanding student loan debt is the recent rise in bankruptcy filings. Although Americans are able seek relief in the courts from credit card debt, government backed student loans are not exempt from bankruptcy filings.
Although student loans are typically not frowned upon because they are used for building a future; however, the numbers are an indication of the challenges of college graduates. The high cost of education has caused many students to resort to credit card to help fund school supplies and expenses. Lay this debt on top of the student loans and upon graduation they are plagued with large debt for 10 or more years. A small consolation is the tax deduction on a portion of the interest. So, while Americans are spending more on higher education, the benefits live with them through a lifetime.