While the Senate is currently rolling out its Credit CARD (Credit Card Accountability, Responsibility and Disclosure) Act, an act designed to protect private credit cardholders from unfair and deceptive practices of the credit card industry, a new sector is beginning to buckle beneath the burden of excessive debts – students.
The continuing crisis has touched all sectors of American economy. Credit companies, looking to gain some ground against losses to defaulted loans and other financial losses, are tightening the noose around student loans. Thus, students are finding it very difficult to finance their continuing education. Students have had to look elsewhere to find some cash to continue schooling, what with the student loans drying up. Their quickest solution – credit cards.
Credit experts are seeing a distressing trend that may lead to another credit industry crash. A former Trans Union credit educator and the current financial expert of Credit.com, Emily Peters recently said that; “We were expecting the findings to be pretty bleak. We're seeing things dry up in student loan financing.”
The situation is very troubling. Students seem to be turning to their credit cards more and more, from textbooks to school tuition. The number of students relying on credit cards is also increasing, with about nine of ten students using plastic to pay for college.
Sallie Mae, a national financial management program and loans provider for students also released a statement this month saying that the average balance of students on their credit cards are at record levels now.
Students have also not been exempt from interest rate increases, which seem to be the trend of credit companies nowadays. Some have seen their interest rate increase from 9.9% to an astounding 25%. Banks are also decreasing their credit limits as well. Even students with good credit history are not exempt.
Another troubling result from the survey is that out of every five students surveyed, two say that they charge items while knowing that they would not be able to pay for them. Unfortunately, these are often high priority items.
“These are no longer frivolous expenditures, like going to Cabo for spring break. These are actual education costs,” Emily Peters said.