Student loans now top credit card debt

College graduation ceremonyNew research reveals some startling, uncomfortable truths about student loans: The amount we as a nation owe for our education has now officially topped what we owe on our credit cards.

According to the Federal Reserve, Americans owed $826.5 billion on their credit cards in June. (The government agency calls the category "revolving credit," but that pretty much boils down to credit card debt.) And according to the publisher of FinAid.org, Americans currently owe $829.8 billion in student loan debt. The bulk of this staggering amount -- more than $600 billion -- is for federal student loans, and a whopping $300 billion of that has been taken on in only the past four years.

If nothing else, this meteoric rise in our collective education debt should give pause to anyone who's thinking about earning a college degree. Recessions are typically popular times for people to enter the academic world, and in the case of most recent recessions, this is a logical idea: You can simultaneously wait out the chilly job market and increase your marketability so that when jobs return, you're well-prepared to jump into the employment pool.

But the difference this time around is that our current recession is one of nearly unprecedented scope by some metrics, unemployment is predicted to remain intractably strong for many years, and a battered housing market makes relocation for a job a daunting prospect for many.

Robert Baker, director of education at Housing and Credit Counseling Inc., a nonprofit credit counseling bureau in Topeka, Kan., says there are a few reasons why our collective student loan debt has mushroomed in recent years. Changes to federal bankruptcy law in 2005 have made it nearly impossible to discharge student loans in a bankruptcy. From the point of view of the lender, this makes them more likely to lend, since they're virtually guaranteed payment even if you file to have your other debts discharged.

Tuition at both public and private colleges has also climbed, while the cap on federal loans hasn't kept pace with the rising cost of education, forcing more Americans into the riskier world of private loans. Finally, Baker says, many of today's students have grown up with a higher standard of living than previous generations and strive to preserve that even while in school. (To anyone with children nearing college age who's toured some of the newer dormitories that resemble upscale hotels, this will not be news.) Combine these factors with a poor economy that has many new grads without the income to pay back their debts even as the interest compounds, and you end up with some serious inflation.

The silver lining, as the Wall Street Journal article points out, is that part of the reason student loan debt has eclipsed credit card debt is because more Americans are paying off their credit cards. But it's crucial to remember in this still-troubled economy that even debt for a "good cause" needs to be repaid.

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