Financial Schools Reviews

New report shows that Americans on average carry more student loan debt than credit card debt
Although credit cards have been in the news lately with regard to new legislation, charge off rates and delinquencies, a new report shows that student loans may be more of a financial threat. New data from the Federal Reserve Board reveals that the amount of student loan debt Americans carry is now higher than their credit card debt.

According to the report, Americans owe roughly $826.5 billion on revolving credit accounts – namely credit cards. In contrast, consumers carry $829 billion on both federal and private loans used to fund their education, finaid.org publisher Mark Kantrowitz told the Wall Street Journal. Kantrowitz also estimates that outstanding loans total $605.6 billion in federal loans and $167.8 billion in the private loan sector.

“The growth in education debt outstanding is like cooking a lobster,” Kantrowitz told the newspaper. “The increase in total student debt occurs slowly but steadily, so by the time you notice that the water is boiling, you’re already cooked.”

With more Americans trying to pare down their debt, the current shift in outstanding loans represents a unique situation. As charge off rates and delinquencies decline, it has become more evident that consumers are capable of and making an effort to rely less on credit and rebuild their savings. Once their debt is paid down, they can stop using their accounts and avoid incurring more debt. But student loans are a different matter.

Most Americans are forced to take out loans to fund their education as the price of tuition increases. Most student loan debt takes years to pay down and can rarely be discharged through bankruptcy. However, as education becomes more costly, the government is taking steps to make federal loans more affordable to students before they are consumed by debt.

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