Quick Facts on Credit Card Debt of College Students

The average student held $3,173 in credit card debt during 2008--up from just $2,169 in 2004, according to a 2009 Sallie Mae survey reported by USA Today. Credit cards are a problem for college students who often use them to make everyday purchases and end up taking years in some cases to pay it off. Because of the rise in credit card debt among college students, federal law makes it harder for companies to try to get students to sign up for a credit card.

Considerations

Credit card debt tends to increase with the grade level of college students. In 2008, college seniors with at least one card racked up $4,138 in debt, while freshman had about $2,038. By the time they graduate, about 20 percent of college students have more than $7,000 in credit card debt, according to the Sallie Mae.

Function

College students are not just paying for small items like pizza with credit cards, but also education expenses, according to Sallie Mae. College kids put an average of $2,200 in education related expenses, such as books and tuition, on their credit card in 2008. For some, credit cards are their only option for paying tuition due to the credit crisis of 2008.

Effects

Carrying credit card debt in college can teach students how to manage their finances, but it may damage their credit rating in the short-term. According to Truth About Credit, 25 percent missed at least one payment and 15 percent went over their credit limit in 2008. Black marks on your credit report not only lower your credit score, but some employers consider your credit history when you apply for a job.

Prevention/Solution

In February 2010, Congress enacted new credit card legislation that makes it harder for credit card companies to sign up college students for a credit card. The new law prevents companies from giving cards to minors. People younger than 21 can apply for a credit card, but only if they have a cosigner or a steady income, according to College Board.

Tip

College Board recommends that college students consider a debit card over credit card so that they do not accrue debt, while having the convenience of a plastic card. If a college student does have a credit card, he should only use it as a last resort and prepare to pay off the balance immediately. Also, reading over the terms and conditions are essential so you do not pay an annual fee or a very high interest rate.