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Fewer College Students Accruing Credit Card Debt

A new Sallie Mae study found that fewer college students own credit cards, and the number has dropped during the past two years. Experts are encouraged by the study and say this shows hope for the long-term financial health of the students and their parents. There are many factors that contribute to the decrease in credit cards and credit card debt, but one of them is the credit card reform provisions of the Credit CARD Act of 2009 targeted towards students.

Students Who do Own Credit Cards Paying Off Balances

Students are avoiding debt by either not opening credit card accounts or paying off their monthly balances in full. One third of the college students that were surveyed reported that they paid off their monthly balances so there was no remaining balance on their credit cards.

Sometimes, students needed assistance from their parents and some did not. On average, students paid $81 per month towards credit cards and parents paid $106 per month.

For the students that are not opening up credit cards they are learning other ways to keep up with their budgets.

Students Taking on More Responsibility for Costs

Students are more in charge of their own finances than they were in the past. The Sallie Mae survey showed that students use their own savings accounts, loans and income to pay 30 percent of tuition costs; students were covering 24 percent of their tuition costs four years ago. This has caused some students to have to forgo certain colleges because of their high costs.

Taking on their own tuition expenses is also leading to more student loan debt, in 2011 student loan debt reached over $1 trillion. Private student loan debt accounted for $150 billion of the total debt. This is somewhat alarming because private student loans do not offer the protection and flexibility that government loans do.

Fewer Students Have Credit Cards

Provisions of the Credit CARD Act were intended to decrease credit card marketing to students, but credit cards are still finding their way into student’s hands. Companies still offer enticing incentives and even allow students to count student loan money as income.

Despite this, in 2012, only 35 percent of undergraduate students had a credit card. This figure was at 40 percent in 2011. Only three percent of students that did have credit cards carried a monthly balance over $4,000. College freshman were the least likely to carry credit cards and ownership rose as the grade levels increased.

The results of the studies are promising but people still face troubling credit card debt every day and need help. Students and nonstudents struggling with credit card debt or bankruptcy should contact an attorney to help them through this difficult time.