Allen, Texas June 26, 2009 – American higher education might best serve its students by inventing a new tradition. Upon graduation, the college president should place a diploma in the graduate’s left hand and a shovel in the right. Too many Generation Y graduates will walk off that stage and face a decade of digging themselves out of credit card debt.
“My dad always said one of the greatest gifts he could give me was for me to graduate college without any debt,” states a recent college student writing using the name Danielle on her blog http://firstday1127.blogspot.com. “It’s wonderful that I’m fortunate enough to graduate college with no student loans to pay off ten, twenty years from now, but I will be graduating next year with credit card debt. I never thought of a couple hundred dollars in unpaid payments on my credit cards as debt. That’s a scary thought.”
“I’ll be 32 years old and still paying for a bill at The Kent from college,” she writes. “It really puts things in perspective when it costs you more in interest then your original bill.”
With credit card companies and bank issuers aggressively pursuing college students, consumers in their late teens and 20s can find it very easy to acquire – and overuse – credit cards. Too often, these students run up out-of-control bills, and their personal debt rises into the thousands of dollars. As a result, these young people start their adult lives owing a great deal of money to credit card companies and banks, without a job or sufficient salary to pay back the debt.
According to a recent study by college financing giant Sallie Mae, 84 percent of college students possess credit cards, on average 4.6 credit cards per student. The average balance for these users stands at $3,173. A staggering 82 percent of students carry balances from month to month, thereby suffering finance charges that put them further into debt.
One company, Resqdebt, a Dallas-area debt relief company, reports seeing the effects in their demographics. Among its 20 percent increase in new clients every month, the company has noticed a disturbing trend toward more low-dollar-figure accounts, those that run $5,000 to $10,000 in debt. From 2008 to 2009, these accounts rose 29 percent. While this might not mean much significant to an outside eye, it means an increase in accounts for young adults, ages 18 to 25, who are too young to achieve higher credit lines.
Partly these debt numbers result from the shortcoming of financial management skills among Generation Y students. A whopping 84 percent in the Sallie Mae study say they need more education on financial management topics. As a result, a concept has been created, financial health management, that could see debt companies soon providing greater education and online resources for its clientele.
While these young adults slip deeper into debt, typical methods of debt relief present unique challenges. Paying the minimums racks up interest charges and can leave them in a significant hole throughout the most exciting decade of their lives. Debt consolidation typically involves using a home as collateral to back a loan, not an option available to many indebted young people. Bankruptcy for students would mean taking a large hit on the credit record while failing to eliminate student loan payments.
Generation Y grew up with the expectation of a lucrative financial future. As they turn to young adulthood, they find themselves in the most challenging financial times in decades. These young men and women need to find the needed resources to overcome their serious debt and find a debt-free lifestyle.