Due to rising education costs, more and more students are turning towards credit cards and loans to finance their education. According to the Project on Student Loan Debt, student debt is on the rise. Nearly 1.5 million students graduate with student loan debt each year. Upon graduation, the average debt is $24,000, which is up about 25 percent since 2004.
In an effort to help, the Consumer Financial Protection Bureau (CFPB) is creating a student office in order to be “A New Voice for Students,” according to the CFPB blog. The office will guide students from start to finish on how to deal with student loans and credit cards.
Many college students are significantly in debt before they even enter the job market. Seven percent even drop out due to financial debt. According to a Sallie Mae report, fewer than 20 percent of college students pay their monthly balances in full. “Too many students are at risk of overpaying for college by pulling out credit cards to pay for textbooks or even part of their tuition bill, instead of using less expensive financial aid to cover these items,” said Marie O’Malley, director of consumer research for Sallie Mae in a press release.
The CFPB office hopes to educate students on the financial implications of long lasting debt. Once given the information, it is up to the student to use it. Some students may find different ways to finance their education, or some might rely on credit cards understanding the importance of handling financial obligations promptly.
Jon Evans, a financial specialist at Credit-Land.com comments on The CFPB goal to help students: “With the help of the CARD Act of 2009 and the Dodd-Frank Act, the CFPB is allowed to examine the methods behind private student loans, and inform students of any practices that would affect their future credit.” The CFPB is also enforcing a ban on random rate hikes on existing balances. However, “To contribute the overall cost of college, students and families need to build a comprehensive budget at list a year in advance. The budget shall cover not only tuition, but also supplies, travel costs and other necessities that contribute to the overall cost of college. This should especially be carefully thought through when the plan to fund education is planned on a using a student credit card, for example.” – Jon says.
It used to be that college students only needed tutors to get through their classes, but with the average student graduating with an average of $4,100 in debt and four credit cards– financial guidance is something that students need now more than ever.