BRAINTREE, Mass., Sept. 6, 2007—While the average credit card usage and debt levels among graduate students have remained stable since 2003, older graduate students carry nearly twice as much credit card debt as their younger counterparts, and just 20 percent of all respondents report paying off their monthly credit card bills in full each month.
Those results are part of a new study released by Nellie Mae, a top national originator of federal and private education loans, and a recognized leader in debt education and financial management for students. The study, "Graduate Students and Credit Cards in 2006: An Analysis of Usage Rates and Trends," is available at www.nelliemae.com.
The percentage of graduate-level students who have at least one credit card decreased only slightly in the past three years (from 96 percent to 92 percent), and the average outstanding balance on credit cards held by graduate students increased 10 percent since 2003 (from $7,831 to $8,612), an increase on par with standard cost of living increases.
"By and large, these are savvy students who have undoubtedly weighed the benefits and costs associated with a graduate education and have elected to attain an advanced degree to better themselves and increase their earning potential," said Marie O'Malley, spokeswoman, Nellie Mae. "However, their responses and behaviors indicate that many of them still need information on reducing credit card debt, financing graduate school, and managing money."
This study is Nellie Mae's sixth in a series conducted since 1998, the fourth to include graduate student data, and the second to focus exclusively on graduate students. The first study was prompted by concern that students were taking on more credit card debt than necessary and overlooking college financing options which offer better rates, benefits, and repayment options. The most recent findings include:
Credit Card Usage
- In 2006, 92 percent of graduate students have at least one credit card, a 4-percent decrease from the 96 percent who had credit cards in 2003. The average outstanding balance on graduate student credit cards increased 10 percent during that time, from $7,831 to $8,612.
- Ninety-four percent of graduate student survey respondents used credit cards to pay for some portion of their direct education expenses, primarily textbooks. Twenty-eight percent admitted paying for some portion of their tuition with credit cards.
- The majority of graduate students, 67 percent, said they took out their first card as an undergraduate.
- Of the graduate student survey respondents, 93 percent would have liked more information on financial management topics before they started school and would like financial management education now.
Credit Card Debt Levels
- The more time spent in graduate school, the more likely a student is to grow his or her credit card debt level. On average, older graduate students (aged 30-59) carry $12,593 in credit card debt, almost twice as much as their younger counterparts (aged 22–29) who carry an average debt of $6,479.
- Eleven percent of first-year graduate students do not have credit cards, while only 4 percent of fourth-year graduate students do not have credit cards.
- As has been true in previous studies, students attending school in the Midwest region of the country tend to carry the highest credit card debt.
- Although 93 percent of respondents try to keep their credit card debt under control by paying at least the required monthly minimum, just 20 percent said they pay off their cards in full each month.
"The upward trajectory of credit card debt levels as these students remain in graduate school demonstrates the need for better planning and budgeting before graduate school begins and as underclassmen," said O'Malley. "Ideally, this group should have ongoing access to financial management education and tools, and receive counseling about their financial aid options each semester."
The study also revealed that the average amount of money put on credit cards for all direct education costs (tuition, room and board, textbooks, school supplies, transportation) was $2,820, with 10 percent of the group charging $7,000 or more. Only 6 percent of respondents did not use credit cards at all for a direct education expense. The most common direct expense for which graduate students used their credit cards was textbooks, with 83 percent indicating they had charged some portion of their textbook costs.
"With the creation in February 2006 of the Graduate PLUS loan—which allows graduate and professional students to borrow up to the cost of attendance for all direct education expense, less any aid received—we can most likely expect to see more students opt for this low-cost federal loan over credit cards," said O'Malley.
Of the 28 percent who said they used credit cards for some portion of their tuition, the average balance estimated was higher at $5,416, with 26 percent of this sub-group charging at least $7,000. O'Malley warns that such usage is disconcerting given that variable interest rates on credit cards average more than 14 percent (Source: Bankrate.com, July 2007). "Student loans are a much wiser financing choice for qualified education expenses than credit cards, because they offer built-in deferment options, low (often subsidized) interest rates, and financial incentives for making on-time payments," she said.
To view the study in its entirety, visit www.nelliemae.com.
About Nellie Mae Since 1982, Nellie Mae has focused exclusively on providing education financing for undergraduate and graduate students and families, through Federal Stafford, PLUS, and Consolidation Loans, as well as its suite of private EXCEL Loans. Online services include loan applications with e-signature, a loan information center, and Nellie Mae's Financial SuccessSM series to help students be brilliant before, during, and after college. Located in Braintree, Mass., Nellie Mae is a wholly-owned subsidiary of SLM Corporation (NYSE: SLM), commonly known as Sallie Mae. Sallie Mae is the nation's leading provider of saving- and paying-for-college programs. The company manages $153 billion in education loans and serves nearly 10 million student and parent customers. More information is available at www.salliemae.com. SLM Corporation and its subsidiaries are not sponsored by or agencies of the United States of America. Nellie Mae: Celebrating 25 years of delivering student loans brilliantly.