Kaulkin Ginsberg Report Says Increased College Student Credit Card Debt Causing Financial Straits for Graduating Students

ROCKVILLE, Md., Sep 10, 2008 (BUSINESS WIRE) -- College students are known for carrying student loan debt; however a new report, The Student Market for Credit Cards: Issues and Trends, finds that more of this year's seniors will be facing a "perfect storm" of financial struggle after graduation, especially due to increased college student credit card debt.

The convergence of higher student loan debt, student attitudes toward credit card debt, and a dim employment outlook are just some of the factors that will cause difficult circumstances for some graduating college students this year, according to the report from Kaulkin Ginsberg, the leading strategic advisor to the debt collection / accounts receivable management industry.

"Students are using credit cards as a last resort to pick up the slack when they have difficulty getting loans or jobs to cover their expenses," noted Dimitri Michaud, Kaulkin Ginsberg Consumer Finance Analyst and author of the report. "With fewer loans and jobs available, you have the makings of an increase in college student credit card debt on top of existing student loan debt."

Michaud added that government loans and grants have failed to keep pace with educational costs, and ten percent of student borrowers now rely on private loans to bridge the gap. The recent credit crisis has impacted the ability of students to obtain these private loans, however. More than two dozen lenders, including Bank of America, Citigroup and Wachovia, stopped or curtailed their private lending to students over the summer.

"Separate studies by the American Council on Education and by U.S. PIRG both found that roughly 25 percent of student credit card holders used their cards to pay for some portion of their tuition," said Michaud. "With major lenders now limiting the availability of private student loans, we may see that percentage of college students paying a portion of tuition on credit cards increase, thus increasing college student credit card debt levels."

Attitudes toward credit may also be a factor in increased college student credit card debt. More than 25 percent of college students think it is reasonable to use their credit cards as a means to raise cash, according to a recent National Association of Retail Collection Attorneys (NARCA) survey. The NARCA survey also revealed that 31 percent of those polled did not worry about college student credit card debt because they believed they could pay back outstanding balances once they were out of school and earning a regular paycheck.

This optimism may be ill-founded, especially for the younger portion of the work force. Unemployment numbers for individuals between the ages of 16 and 19 - years that encompass a good portion of the college student population - rose steadily in May, June, and July - from 18.7 percent, to 18.1 percent, to 20.3 percent respectively. This means that many students were unable to earn income during the summer break, and the outlook for employment after graduation may be similarly bleak.

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