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Financial trouble is the biggest cause of student drop-out rates. One of the biggest causes of this trouble is - students taking on too much credit card debt.
Bankruptcy filings among 18- to 24-year-olds have been rising – doubling in the 1990s. Students are defaulting on student loan payments because they have taken on too much debt - a complex pattern of debt involving credit cards, consumer loans, and student loans. Students have used student loans to pay off credit card debt or for vacations or other non-education related purchases.
Unfortunately, this can impact students significantly after graduation, haunting them for years to come. It can hurt their chances of being hired and finding housing. But the biggest risk of bankruptcy comes in the next stage of life, which brings much higher bills and financial responsibilities. Carrying significant debt into this stage of life can significantly impact the ability to meet financial obligations.
Student Loans
Student loan debt has increased steadily along with the cost of a college education. Students often take on this debt, as well as credit card debt, not realizing the impact on their quality of life after graduation.
Median undergraduate debt: $16,500*
- Average undergraduate debt: $18,900
Class of 2002:
- Average student loan debt of private-school graduates: $21,200
- Average student loan debt of public-school graduates: $17,100
Source: Nellie Mae http://www.nelliemae.com/library/research_10.html
*Half of students with loans have more
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Credit Card Debt
The use of credit cards by undergraduate students is at an all-time high. A survey of college students by Nellie Mae published in April 2002 found:
- 83% of undergraduates have at least one credit card
- An average credit card balance of $2,327
- 27% of undergraduates who have cards, have high-level balances
- 21% between $3,000 and $7,000
- 6% over $7,000
- Students double their average credit card debt - and triple the number of credit cards in their wallet- from the time they arrive on campus until graduation.
- The average student has 4.25 credit cards
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After Graduation
The problems students have managing their debt and neglecting to save is a reflection of the larger society. It’s a troubling picture.
- Forty percent of Americans say they live beyond their means.
- In 2002 the average American household had $8,900 in credit card debt, up from $3,200 just 10 years earlier.
- Sixty percent of American households fail to pay their credit card bills in full each month and carry average balances of more than $4,000.
- The average household pays over five hundred dollars a year in interest charges on credit cards alone.
- In 2001, more people filed for bankruptcy than graduated from college.
Adult problems of rising bankruptcy rates, low saving rates and frequent misuse of credit can be avoided if you begin NOW to create a savings habit. This is what Project C.A.S.H. is all about. Because you are just starting out, you can make decisions that establish a savings habit, rather than the self-defeating habit of spending money you don’t have through the use of plastic. And most exciting – there are many years ahead of a college student to take advantage of the Time Value of Money.
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The four primary contributors to student debt problems:
The extension of unaffordable credit lines
Peer pressure to spend
Lack of financial knowledge
Increasing education-related expenses
Prof. Robert D. Manning
» WEBSITE
Georgetown University
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“...nearly 80 percent of students recently surveyed underestimated the total cost of their student loans. And in a series of debt management focus groups conducted nationwide, USA Funds found a prevailing trend of ‘information disconnect’ between students’ understanding and the reality of their total debt.”
» WEBSITE
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