Student loan debt surpassed credit card debt for the first time last year, according to a report by Mark Kantrowitz, publisher of FinAid.org and Fastweb.com, websites that help students find ways to pay for college.
Kantrowitz compiled the overall estimate of current student federal and private loan debt, which is likely to top $1 trillion this year as students continue to borrow more money for their education.
The current credit card debt is $826.5 billion, while the student loan debt is $830 billion, according to the report.
USC ranks seventh in the nation for average student debt, with the average graduate having to repay a debt of $36,787, according to a CNBC study released earlier this year. Nationally, last year’s graduates owe an average of $24,000 in student loans.
Michael Kim, chief marketing officer for the USC Credit Union, used to run the student loan program at USC Credit Union and said it is encouraging that student loan debt has eclipsed credit card debt.
“The fact that credit card debt is falling behind student loan debt is definitely a good sign that students are realizing the dangers involved in getting bogged down in credit card debt,” Kim said. “Especially while in school, it’s important that students manage their spending habits and do not rely upon credit cards to make purchases they can’t afford.”
Many economists view student debt as a valuable investment. Kim encourages students to note that debt, whether good or bad, is still debt, and needs to be repaid.
“The bottom line is that all debt must be repaid,” Kim said. “Students have to realize that these are obligations that must be repaid and the consequences for defaulting on your loans or credit cards are severe.”
Students often make it a priority to pay off credit card debt, rather than loan debt. Kim said this is because student loan debt is easily forgotten while students are still in school, since repayment doesn’t begin until after they graduate. Credit card debt, however, is more immediate and requires monthly payments.
“While students are in college, student loans get pushed to the back. They are easier to forget because we don’t start paying them off until after graduation and they don’t accrue interest until then,” said Blake Phillips, a sophomore majoring in computer engineering and computer science.
Kim said students need to be aware of both their credit card and student loan debt.
“Defaulting or not paying back any of your loans or credit cards will immediately impact your credit score,” Kim said. “Bad credit can impact your ability to secure a job with more and more companies pulling a job applicant’s credit score.”
To balance credit card debt and student loan debt, Kim recommends students try to minimize loans as much as possible.
Credit card debt should be avoided at all costs, according to Kim, and the total balance should be paid off each month to avoid accruing interest and to build a positive credit history.