College Kids and Credit Cards: Sallie Mae’s Latest Study

Despite the credit crisis, college students are relying on credit more than ever before.

Sallie Mae just released its 2009 study, How Undergraduate Students Use Credit Cards. The student loan giant has been doing this study every few years since 1998. The findings this year show that college students are still getting plenty of offers for credit cards (many students have four or more cards), and that they’re using them to charge everything from tuition and rent to clothes and food.

Some of the more alarming findings from the study include:

  • Half of all college students have four or more credit cards.
  • The average balance on a college student’s card is $3,173.
  • 39% enter college with a credit card (up from 23% in 2004).
  • Freshmen carry a median debt of $939 (triple that of 2004).
  • Seniors graduate with an average credit card debt of $4,100.
  • 30% of students put tuition on their cards.
  • 60% of students were surprised by how high their credit card balances had gotten.
  • 40% charged items they knew they couldn’t afford to pay back.
  • Only 17% of students regularly pay off their card each month, while 82% carry a balance from month to month and pay the necessary finance charges.
  • 64% of undergrads said they would have liked to receive some sort of financial management education in high school.
  • 45% of students say they feel a lot of anxiety about being able to pay their monthly credit card debt.

Using Credit to Cover School and Other Expenses

The top reason students turn to credit cards to pay for education expenses is that they don’t have enough savings and financial aid to cover the complete cost. “Too many students are at risk of overpaying for college by pulling out credit cards to pay for textbooks or even part of their tuition bill, instead of using less expensive financial aid to cover these items,” said Marie O’Malley of Sallie Mae.

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But they aren’t just putting textbooks and tuition on their cards. Many college students are using credit for “extras”: 70% of students charge clothing and cosmetics. (Of course, this might be reflective of the fact that the study’s respondents were 74% female and only 26% male.)

Doing the Minimum

Most college students pay their monthly minimums, and therefore aren’t really endangering their credit score. The problem is that only 17% pay their balances in full each month, while the rest shell out for the finance charges on balances carried from month to month.

Based on the average credit card balance of $3,713 on a card with an average APR of 14%, a college student will end up spending $2079 in interest during his or her college career.

The SpendOnLife Scholarship

Part of the reason students are relying on their credit cards so heavily is because the financial aid they were counting on didn’t come through. Stricter lending practices and the current economic climate make it harder than ever for students to qualify for financial aid. is offering scholarships designed specifically for those students who were denied student loans due to past or current credit problems. Our Credit Challenged scholarship has a deadline of June 15th, 2009, and is open to all students at two-year and four-year colleges in the U.S. The goal of the scholarship program is to help students get through college with a little less financial stress, and to help them enter the “real world” with a clean credit slate.

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