Level Of Student Debts To Soar

With the young generation living in a world of electronic technology; where you can go shopping from the comfort of your own home, as well as socialise with friends and even pay bills online, and as a majority of purchases are now being made by credit cards, debit cards and store cards, it can be suggested that students may not realise the value of "real" money.

The number of students relying on credit cards has risen to a record level, as approximately nine in ten of college students in America, rely on credit cards to cover the cost of their education.

According to a recent survey, college students could be landing themselves into a deep credit-card disaster which could result in major consequences in the future.

The research revealed that more students are now spending higher amounts on their credit cards despite the current financial downturn.

It found that 90 per cent of college students use their cards for school expenses such as textbooks, stationary and tuition fees.

However, according to financial expert, Emily Peters at Credit.com, an internet financial information service, the number of students taking out student loans has plummeted.

She said: "We were expecting the findings to be pretty bleak; we're seeing things dry up in student loan financing."

Nearly a third of students had paid for their tuition fees via credit cards - a 24 per cent increase compared with statistics from 2004.

The average credit card balance for students in America, now lies at $3,173, reaching record levels in ten years since the figures were first recorded.
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As a result, millions of graduates will soon be leaving further education struggling to pay off debt as levels of unemployment continues to increase.

Before the financial crisis, the number of students defaulting on lenders, had increased from 4.6 per cent to 6.9 per cent within the space of two years.

Sallie Mae, America's largest student loan lender, revealed that it had seen its defaults, increase by nearly 50 per cent from 1.44 per cent in 2006 to 2.85 per cent in 2008.

Lauren Asher, the acting president of the Project on Student Debt, a non-profit research and policy organisation, said: "Economic downturns affect people's ability to pay off all kinds of debt, and you have more people with student loans than ever before."

As a result, officials believe that the numbers of defaults will soar considerably this year.

Arne Duncan, the US secretary of education, also expects an increase in the number of students who will be struggling to repay their loans and is now preparing for the rise in defaults.

He said: "Whether we like it or not, that's a reality we're looking at."

Peters added that: "There are many indicators that student debt is the next big crash to happen."

in addition, she warned: "We already have been seeing it in the delinquency rates. It will not be good."


RESOURCES
Having a credit card can lead to mounting debts. If you need financial advice or help with a loan, find information at OnlyFinance