Today’s college student just can’t catch a break these days. A new report released by the Institute for College Access and Success says the average 2011 college graduate walked away from school with $26,600 in student loans. A full two-thirds of all American college students are now carrying student loan debt.
This marks a new high for the report, which has been issued since 2005. Meanwhile, there continue to be record numbers of loan defaults and a job market that offers anything but jobs. Almost 40% of college graduates are now working in positions that don’t require a degree, which means they’re earning far less than what they anticipated when they chose their career paths.
Recent college graduates have entered an enormously difficult job market, which poses particular challenges for those who need to begin paying back student loans,
the study said.
Also this week, the New York Federal Reserve shared its own finding that five million student loan debtors have at least one loan past due. What many of these graduates are finding is a significantly different job market than what was available as they began their college careers. You may recall an earlier report this year that showed the collective amount owed in student debt has surpassed the $1 trill mark.
Another interesting cycle that’s beginning to emerge has to do with higher tuition and fewer available grants. This means, of course, that millions of college students and/or their families are taking out loans to finance their education.
And…the Credit Cards
In a related story, the International Journal of Business and Social Science also completed one of its annual reports on college students and credit. A whopping one half of all college students own at least four -and often more – credit cards. That is a startling finding, especially considering the 2009 CARD Act which makes it illegal for credit card companies to market to college students. Instead, Leah Hampton, a Kentucky CPA says,
Typical college students make very attractive customers for credit card companies. Most college students think about the here and now, and are not focused on their financial futures.
Despite the tougher restrictions, including an ability to demonstrate financial capability or have a co-signer in order to get a credit card, the requirements and efforts are still lax and it’s proving to be a difficult law to enforce. So why are so many gaining approval anyway?
I’ve heard stories about students listing their student loan availability in the income section and getting approved,
said Mitchell D. Weiss, who teaches a financial literacy course at the University of Hartford in Connecticut.
I’ve heard about students asking friends and relatives to cosign.
Clearly, access to credit isn’t anymore difficult today than it was for college students a decade ago. And if you’re the parent of an adult college student, there’s not much you can do.
These truths are why so many parents are turning to prepaid or secured credit cards, especially for their teens who’ve not left for college yet. It’s almost like a final opportunity to instill good spending habits. Parents are more confident sending their kids to college with a credit card if there is a solid base from which to build from.
Another option is for parents to provide their college student an authorized card on their existing credit card account. It’s easy to set up alerts and other protective mechanisms to keep spending in check. Parents who choose this route are encouraged to ask the card company for a card with a different number for a few reasons: first, it’s easier to keep the spending in check if you don’t have to grow through pages of charges ensuring there are no questionable charges (two account numbers separate the charges) and also, if the card is lost of stolen, the damage is maintained to the one credit card number.
Finally, another fact emerged: many of today’s college students aren’t telling their parents about one or all of their credit cards. They have their monthly statements sent to their college, completely bypassing Mom and Dad’s mailbox. It’s just one more reason why it’s important to stay a step ahead. The last thing parents want for their kids is to start their adult lives with overwhelming credit card debt. It’s complicated enough with realistic belief that they may have to should student loan debt; more debt only adds to that extensive burden.
Remember to encourage both good spending habits and proper financial management – every little bit done now is a step in the right direction once they’re in the working world.
What are your thoughts? Are you carrying student loan debt? How about credit card debt from your college days? Share your story with us – we want to hear it.