U.S Students turn to credit cards to cover tuition fees

With the cost of further education increasing rapidly, America’s student loan firms have reduced the amount lent to students.

As a result, students are being forced to look elsewhere for money with which to pay for their university fees.

More of America’s students who are in higher education are now turning to credit cards in a bid to pay their university tuition fees.

According to research from a US student loan giant, Sallie Mae, there has been a growing number of students replacing student loans with credit cards.

Figures found that 30 per cent of students in the US had paid for university expenses such as tuition fees, text books, and other supplies using credit cards last year, compared to 24 per cent in 2004.

Last year, students spent an average of $2,200 on their high interest credit cards to pay for university expenses, whereas an average of $942 worth of tuition fees had been spent on the cards in 2004.

This could, however, suggest that the matter comes down to the increasing cost in tuition fees as well as a surge in credit card use.
Increase in tuition fees

Tamara Draut, Vice President of a firm that studies the ‘economic concerns of young adults’ and increased debt, Policy and Programs at Demos, stated that the figures could be down to the increase in tuition fees.

She said: "Adjusted for inflation, college tuition at the average four-year institution has increased 35 percent in the last five years alone."

According to the College Board, within the last year, tuition fees at private four year schools have increased by 5.9 per cent with the fees at four year public institutions rising by 6.4 per cent.
America’s credit card debts to soar

Marie O’Malley, director of consumer research for the student loan firm stated that students replacing the student loans with credit cards to pay for education will end up paying more in the long run.

She said: “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.”

Furthermore, the study found that students have an average of 4.6 credit cards each with only 17 per cent of them paying off their monthly balances.

This leaves 83 per cent of the students building up their debts.

Kalman Chany, president of Campus Consultants, a college funding adviser stated that the credit cards were the “lender of last resort.”

He said: "If (students) can't get private loans, they turn to credit cards."

Indiana State University junior, Mitch Lathrop, who is covering most of his fees by the use of a credit card said: "Some costs aren't covered. You’ve got to pay them somehow, so I paid them with a credit card."

Lathrop is expected to have to pay off not just $15,000 in loans, but also an additional $3,000 in credit card debt by the time he graduates.

He said: "It's a concern to leave college with debt, not only with loans, but with credit cards as well.”

And as more students turn to the “lender of last resort,” credit card debt will continue to soar in America.