Americans’ Credit-Card Debt Surpassed By Student-Loan Debt

By on September 9, 2010 in News 20

brokeBIG_23547tIn August, an unheralded milestone was passed: Americans now owe more on student loans than their credit cards. Credit-card debt has actually gone down a bit over the last two years, due to increased frugality and companies cutting off lines of credit. College-loan debt, on the other hand, keeps rising and rising…towards a trillion dollars, the Wall Street Journal reports:

Americans owe some $826.5 billion in revolving credit, according to June 2010 figures from the Federal Reserve. (Most of revolving credit is credit-card debt.) Student loans outstanding today total some $829.785 billion.

“The growth in education debt outstanding is like cooking a lobster,” Mr. Kantrowitz says. “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.”

Student Loan Justice, a Washington State-based student loan advocacy group issued a statement on the student-loan eclipse, estimating that media coverage of credit cards exceeds coverage of student loans “by a factor of approximately 15-to-1 based on unscientific news surveys conducted since 2007.”

But student loan debt, in many ways, is different than credit-card debt. These loans typically can’t be discharged in bankruptcy. They have different repayment terms, some of which can catch some have heavy consequences for borrowers who miss payments and borrowers’ families.

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  • Vox Penii

    I hope that those with excessive student loans are at least studying something practical and useful, like gender studies

    http://www.thefrisky.com/post/246-confessions-of-a-regretful-gender-studies-student/

  • Butter Knife

    Having read that article, I can come to only one conclusion: the author failed to take anything of greater meaning from a few classes. She’s partially right, whether or not Eminem is a sexist, racist, homophobic idiot was never a terribly important question, and even now it is more of a dated reference than anything… developing the skills to analyze what a person says and does, to view those things in the greater context of society, and to make reasoned determination about the relative worth of their contributions, however, is an extremely valuable skill. Her assertion that studying current politics would have been substantially more useful is, on its face, quite silly: our current president was virtually unheard of at the time, and Tom DeLay (remember him?) was a big shot… at least Britney Spears is still around.

    And don’t get me started on her mention of that horrid math class… Perhaps it’s a mistake to push everyone into the tricky hard maths (ie. calculus), especially since they actually aren’t all that useful for most people to know, but it frightens and confuses me how many people out there have no basic grasp of everyday mathematical concepts. Simple fractions, basic statistics, the differences between standard arithmetic operations and their various uses… these things are not terribly complicated or difficult to learn and understand, they won’t hurt you, they don’t need to be mysterious and abstract and they actually ARE quite important.

    But hey, why own up to the fact that you got too wrapped up in the details to figure out what you should have actually been learning when you can just blame the curriculum instead?

  • Anonymous

    Well, duuuuuhhh, mofo, of course student loans can’t be discharged under the bankruptcy laws.

    That’s why the corporate whores of both (Ha! Ha! — that’s a laugh, calling the bankster party two parties!) parties passed that bankruptcy legislation back in 2005: to make it illegal to discharge securitized student loans, and securtized mortgage loans.

    Otherwise, how could the banksters become debt-financed billionaires? Takes securitized debt peddling, kiddies.

  • myth_slayer

    Well, duuuuuhhh, mofo, of course student loans can’t be discharged under the bankruptcy laws.

    That’s why the corporate whores of both (Ha! Ha! — that’s a laugh, calling the bankster party two parties!) parties passed that bankruptcy legislation back in 2005: to make it illegal to discharge securitized student loans, and securtized mortgage loans.

    Otherwise, how could the banksters become debt-financed billionaires? Takes securitized debt peddling, kiddies.

  • Haystack

    This infographic describes the problem well:

    http://www.collegescholarships.org/research/student-loan-scheme.jpg

    Basically, because loans are backed by the government and are not subject to the consumer protections, there’s now an incentive to knowingly write loans that are likely to be defaulted. It’s much like the sub-prime lending for home owners. In this case, you get students borrowing excessive amounts of money to study basket weaving, then, when they default, you throw on extravagant collection fees, and you start garnishing their wages. Often private lenders own collection agencies of their own, and engage in predatory lending.

    You can say what you like about what personal responsibility and choices of majors. All that is valid. At the same time, recall how naive you probably were when you were 18, had little real-world experience, and colleges/lenders were marketing themselves to you. Colleges do a good job of leading you to take for granted that you’ll be able to find a job in whatever interests you, and lenders bombard you with statistics about the average earnings of college graduates.

    Sure, you’re responsible for your choices, but if student loans were subject to the same consumer protections as other loans, lenders might start deliver a much more *realistic* message about what they have to offer.

  • Haystack

    This infographic describes the problem well:

    http://www.collegescholarships.org/research/student-loan-scheme.jpg

    Basically, because loans are backed by the government and are not subject to the consumer protections, there’s now an incentive to knowingly write loans that are likely to be defaulted. It’s much like the sub-prime lending for home owners. In this case, you get students borrowing excessive amounts of money to study basket weaving, then, when they default, you throw on extravagant collection fees, and you start garnishing their wages. Often private lenders own collection agencies of their own, and engage in predatory lending.

    You can say what you like about what personal responsibility and choices of majors. All that is valid. At the same time, recall how naive you probably were when you were 18, had little real-world experience, and colleges/lenders were marketing themselves to you. Colleges do a good job of leading you to take for granted that you’ll be able to find a job in whatever interests you, and lenders bombard you with statistics about the average earnings of college graduates.

    Sure, you’re responsible for your choices, but if student loans were subject to the same consumer protections as other loans, lenders might start deliver a much more *realistic* message about what they have to offer.

    • http://voxmagi-necessarywords.blogspot.com/ VoxMagi

      Nailed it!

      Holding these companies accountable in a realistic way regarding their interest rates and collection practices would greatly reduce the weight of student debt. They may pay 50-60k to get someone through college…but transforming that into more than 100,000 in debt (and thats a rosy scenario) is a trick of financial chicanery that should end…immediately.

  • TeMpTeK

    Thank the Dept of Education for guaranteeing student loans… Kind of like how Fanny and Freddie guaranteed mortgages to every Tom, Dick N Harry.. Make no mistake!… central govt planning has done NOTHING but artificially drive up costs first to the detriment of the unsuspecting home buyer.. and now to our children who will graduate with the equivalent of a 30 year mortgage debt for a barely above average job.
    The “Austrian school of Economics” is the only way!

  • TeMpTeK

    Thank the Dept of Education for guaranteeing student loans… Kind of like how Fanny and Freddie guaranteed mortgages to every Tom, Dick N Harry.. Make no mistake!… central govt planning has done NOTHING but artificially drive up costs first to the detriment of the unsuspecting home buyer.. and now to our children who will graduate with the equivalent of a 30 year mortgage debt for a barely above average job.
    The “Austrian school of Economics” is the only way!

  • Hadrian999

    it’s all part of the long term goal to raise the cost of education beyond the ability of the peasants to afford so we can go back to the good old days of lords and serfs.

    • Haystack

      Internet-based universities are going to burst that bubble, though. They may as good, but they’re much cheaper, and the motivation of the student counts for a lot more than the setting.

      • http://voxmagi-necessarywords.blogspot.com/ VoxMagi

        Actually…semi-scam universities are facing a crackdown on federal dollars because of their rates of failure and the often overstated value of their degrees. The word is out in corporate USA…and third rate degrees from barely legitimate colleges are not in demand…they’re almost more like the kiss of employment death.

        Take away the loan validation for these places and disconnect them from federal dollars and they’ll dry up and die off overnight.

  • Hadrian999

    it’s all part of the long term goal to raise the cost of education beyond the ability of the peasants to afford so we can go back to the good old days of lords and serfs.

  • Haystack

    Internet-based universities are going to burst that bubble, though. They may as good, but they’re much cheaper, and the motivation of the student counts for a lot more than the setting.

  • http://voxmagi-necessarywords.blogspot.com/ VoxMagi

    Actually…semi-scam universities are facing a crackdown on federal dollars because of their rates of failure and the often overstated value of their degrees. The word is out in corporate USA…and third rate degrees from barely legitimate colleges are not in demand…they’re almost more like the kiss of employment death.

    Take away the loan validation for these places and disconnect them from federal dollars and they’ll dry up and die off overnight.

  • http://voxmagi-necessarywords.blogspot.com/ VoxMagi

    Nailed it!

    Holding these companies accountable in a realistic way regarding their interest rates and collection practices would greatly reduce the weight of student debt. They may pay 50-60k to get someone through college…but transforming that into more than 100,000 in debt (and thats a rosy scenario) is a trick of financial chicanery that should end…immediately.

  • http://voxmagi-necessarywords.blogspot.com/ VoxMagi

    Putting an end to mandatory curriculum fluff would be a nice gesture too. Universities have long profited from setting required courses that are completely irrelevant to the chosen major. The added burden of extra credit hours and textbooks for classes with no applicable value is one more drain on pocketbooks that increases the size of burdensome loans.

  • http://voxmagi-necessarywords.blogspot.com/ VoxMagi

    Putting an end to mandatory curriculum fluff would be a nice gesture too. Universities have long profited from setting required courses that are completely irrelevant to the chosen major. The added burden of extra credit hours and textbooks for classes with no applicable value is one more drain on pocketbooks that increases the size of burdensome loans.

  • http://www.cheap-credit-cards.org credit card application

    Good that Department of education is giving student loans for there financial problems to their tuitions. I guess they need to do more ways to solve the problem.

  • Butter Knife

    Having read that article, I can come to only one conclusion: the author failed to take anything of greater meaning from a few classes. She’s partially right, whether or not Eminem is a sexist, racist, homophobic idiot was never a terribly important question, and even now it is more of a dated reference than anything… developing the skills to analyze what a person says and does, to view those things in the greater context of society, and to make reasoned determination about the relative worth of their contributions, however, is an extremely valuable skill. Her assertion that studying current politics would have been substantially more useful is, on its face, quite silly: our current president was virtually unheard of at the time, and Tom DeLay (remember him?) was a big shot… at least Britney Spears is still around.

    And don’t get me started on her mention of that horrid math class… Perhaps it’s a mistake to push everyone into the tricky hard maths (ie. calculus), especially since they actually aren’t all that useful for most people to know, but it frightens and confuses me how many people out there have no basic grasp of everyday mathematical concepts. Simple fractions, basic statistics, the differences between standard arithmetic operations and their various uses… these things are not terribly complicated or difficult to learn and understand, they won’t hurt you, they don’t need to be mysterious and abstract and they actually ARE quite important.

    But hey, why own up to the fact that you got too wrapped up in the details to figure out what you should have actually been learning when you can just blame the curriculum instead?