In light of recent credit reform that makes it harder for credit card issuers to target college students, it seems that current students are relying less and less on credit; as a national study shows that fewer students carry credit cards these days.
According to a recent study from Sallie Mae that tracked college students across the United States, credit card ownership among college students is down significantly from this time two years ago. To be more precise, one-third of the students surveyed reported having absolutely no credit card balance at all. Of those that carried no debt, most were responsible enough to pay off their balances as they accrued, sometimes with the assistance of their parents.
Assistant professor at the University of Houston Law Center, Jim Hawkins, says, in regards to this:
I think it is good for students, their families and their long-term financial health.
The educator has carefully monitored the correlation between college students and credit cards for some time now. He continues,
Not only are students avoiding the debt they can rack up by opening a credit card in college, they are learning other budgeting techniques and payment patterns that can help them avoid the seduction of over-indebtedness in the future.
Adi Redzic is 25-years old, so he belongs to the millennial generation that is currently in college or recently out. As a recent graduate, he is the managing director for the iOme Challenge. This event is an annual competition that is designed to promote better retirement planning and improve early financial literacy on college campuses.
He reports that their involvement is improving and the competition shows great promise in regards to the personal responsibility and behavior of college-aged students these days. Redzic also said that there are many factors involved with these diminishing statistics, but provisions altered through the Credit CARD Act of 2009 has a lot to do with it.
The Consumer Financial Protection Bureau and the U.S. Department of Education, together, have reported that student loan debt in the United States has surpassed $1 trillion (in 2011). This is supported by a report released by federal official on the “Private Student Loans” study which also exposed that approximately 15 percent of this debt (about $150 billion) is from private student loans. These are loans granted to students from organizations other than the federal government student loan program. While these loans offer promising opportunities for excellent students seeking an affordable higher education, private loans like these often lack the flexibility of convenience and the security of a fixed interest rate that are among the attracted features protected by the federal program.
U.S. Education Secretary Arne Duncan attests:
Subprime-style lending went to college and now students are paying the price. We still have some work to do to ensure that students who take out private student loans have the same kinds of protections offered by federal loans. In the meantime, if you have to take out a loan to pay for college, federal student aid should be your first option.
This credit card report also exposed other important statistics:
- 35 percent of college undergraduates owned a credit card in 2012, which is down from 40 percent the previous year and 42 percent the year before that.
- 33 percent of students carried a balance of $0 on their cards with about 40 percent carrying a balance of under $500
- Freshmen are still the least likely to carry a credit card
- Credit cards are rarely used for tuition or other education expenses
- Students born into high-income families are most likely to carry a credit card (at 53 percent), followed by middle-income families (31 percent) and low-income (29 percent)
- Only 3 percent of undergraduates carried balances more than $4,000
- Debit cards are much more popular among college students than are credit cards