Student Loans are Bigger, Duh

Posted by: Meredith K. | Nov 03,2007


Here’s a blog entry that made me really irritated - Student Credit Card Debt: Loans are a Bigger Problem.  It talks about a study in Iowa showing that overall student loan debt is more than credit card debt on average, to the tune of $23,000 in student loan debt as compared to $1100 in credit card debt. Because the credit card number was lower, this was an invitation for credit card companies to come and aggressively market to students on Iowa college campuses.  

Obviously, student loan debt is higher than credit card debt.  It always has been and always will be.  With the median cost for a liberal arts school at $30,000 a year, student loan debt is going to be astronomical.  Does this make credit cards less important?  This comparison is a fallacy, as credit card debt most commonly has much higher interest and fees than student loan payments.  Also, when combined with high student loan payments, it could lead to real debt difficulties after graduation.  The two debts work hand in hand, they aren’t separate.  

Just going by the numbers of a balance is not enough.  $1000 in debt with 20% APR, a percentage that is common for student-issued cards, is going to take  years to pay off, as the cardholder is going to be making new purchases on the card.  That $1000 could potentially balloon into $2000 or even $3000 when you factor in interest.  Student loans, on the other hand, are not attached to such unmanageable rates.  So while student loans are obviously going to much higher than credit card debt, it’s credit card debt that poses the greatest overall risk.  

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