American Students Hit Hard By Rise On Credit Card Interest Rates

Surging credit card rates over the past few months have created a desperate situation for many college students and graduates. While the percentage of American college students and graduates in debt has remained stable in recent years, the average debt per student has risen significantly.

The College Board reports that in each year between 2000-01 and 2006-07 approximately 60 percent of bachelor degree recipients borrowed money to finance their education, but the amount borrowed rose 18 percent during the same period. The total amount of education loans -- both federal and private -- more than doubled from $41 billion in 1997-98 to $85 billion in 2007-08 due to inflated tuition costs and stagnant blue-collar wages.

A number of HuffPost readers, both students and parents, have shared their stories with us.

"This school year for me has been the worst yet," wrote Nadya Lateef, a 24-year-old senior at California State University in Long Beach. She says she had to take out several student loans and has worked part-time while taking classes full-time. Still, money has "not been anywhere near enough," she wrote. As a result, she says she must rely on her credit cards to cover even her most basic expenses.

"My credit card balances have skyrocketed. My spending is frugal yet every week I have to use my credit cards to pay for expenses. For my groceries, for my gas, for school supplies, even to pay for my own degree check report so that I can graduate," Lateef said.

A 2006 report by the American Council on Education showed that more than 12 percent of students use credit cards to pay for tuition.

Recently, Lateef says her situation became even more precarious when Citibank notified her that the interest rate on her credit card would rise to 29.99 percent. Lateef does not know how she will be able to pay her bills and she has had a hard time focusing on her studies: "The more hours I work to pay my credit card debt the more my school work suffers."

Beth Leiker from Los Angeles described how her daughter, a recent graduate who put her last semester of college on her Citibank credit card, recently received a notice warning that her interest rate would rise to 29.90 percent, despite her good credit history.

Story continues below

advertisement

"She just graduated from college in June, got a job right away but her student loans came due and now her credit card jumped the rate to a point where she can't keep up. If she didn't live with me, she'd be going bankrupt. She has friends who can't get a job or got laid off.... They are in dire straights, each moving back in with their parents who, like me, are also facing layoffs and financial problems." Leiker has seen her own interest rate escalate to 29.90 percent on her Capital One credit card.

Jessica Pardee, a doctoral student in sociology and a visiting instructor at the University of Central Florida, says she encountered the same problem with Capital One. "I pay my bill on time, I pay in full. I pay the interest without complaint if I carry a balance. So imagine my anger when my interest rate was increased from 8.90 percent to 17.90 percent," she wrote, denouncing what she calls an "interest pillaging" from banks and credit card companies.

Banks and credit card companies continue to saturate the ad market and make sure they remain visible on campuses around the country in an effort to solicit new accounts from students.

In March 2008, the US Public Interest Research Group published a survey showing that 76 percent of students had stopped at tables to look at credit card offers during school events, often lured by free gifts. The study also found that 80 percent of students have received mail from credit card companies, some more than once a month. According to PIRG, many students signed up for a credit card without fully understanding the terms of the contract.

Are you using credit cards to make ends meet? Has a credit card company raised your interest rate after missing a single payment -- or raised your rate even though you haven't missed one? Have you been charged unexpected add-on fees?

If so, we want to hear your story too. Share it with us by emailing [e-mail].

Comments

[Misa Nakashima]

wth is happening? why are the banks still allowed to raise interest up tp 29% . what was the significance of the stimulus? was it to pull the banks out of there problems and then allow them to profit more off the citizens? our tax payer money is helping them, yet they won't help us pay off our credit. they keep rising the interest. is obama working on changing this? this is one of our nations biggest problems. my husband and i work like dogs and all we are doing is paying our interest on the cards every month. we were never late and always good customers. they raised our 7.99% interest to 29%. i thought our government was trying to help our eonomy and people. it seems like, this can be controlled. where is the law to stop this? if our government could lower our interest rates, we could pay off our debts. i don't understand what is going on...nothi­ng is changing. everything is getting worse. A lot of the problems could be fixed if they would just lower the interest & give a flat rate.

[justkeepswimming]

Honest question: aren't federal student loans, Pell grants and scholarships enough anymore? Has the cost of education gotten that out of hand? I got through college on those plus work study, odd jobs (dogwalking, housesitting, babysitting, research assistantships, you name it), and generally never buying anything that wasn't required for a course. Then I paid off my student loan debt, but the rates on those were controlled by the feds. Is it really no longer possible to get a degree without taking on credit card debt to pay for it? I did get the constant credit card solicitations, but I figured if I couldn't afford to buy it with cash, I couldn't afford it, so I didn't get one until after I graduated.

[2garen]

Pell grants have been cut drastically during the bush administration, student loans have been privatized, books and tuition have sky rocketed. The rates on the loans are no longer controlled by the feds they are controlled by the ones that make the loans. There was a scandal this last year where the loan sharks made a deal with a bunch of school to stere loans in their direction instead of letting students know about the very few federal loans available. Other countries in this world believe it is important to have an educated population examples are France, Germany, Sweden, Denmark,the list goes on. It all started with the Regan administration and was neatly finished off by GW.

[AbeMartin]

The big banks which have been receiving TARP funds (e.g. Bank of America which now owns MBNA, the largest credit card operation in the country, and Citi), STILL think they can do whatever they want. Wanna bring interest rates down and stop paying these greedy pigs 21% a year + late fees? Pull the card on which you owe the greatest amount of money. Cut the sucker in half and then pay it off aggressively. Then move on to the second card and repeat the sequence.

Pay cash or use a debit card. The only defense against these greedy vermin is to starve them out of their jobs.

[aweissnet]

Tell them you refuse to pay 20% interest, as that wasn't the deal when you signed up. They don't like it, tough, they don't see a penny.

They'll negotiate, trust me.

[mediamarv]

So are us retired veterans. Chase raised my rates arbitrarily altho I had never missed a payment. The customer rep Marsha made it sound like it was my fault for having a balance. So I closed the account and Chase may get tax dollar baillouts but won't get another cent from me... I will try life without a credit card and see what happens. Stay tuned.

[solid]

Mobsters would blush at these sort of rates.

[OwsleyStanley]

The frightening thing is it's only going to get worse. you thought the housing bubble was bad, just wait until the credit cards blow up and large numbers of people can't buy their freakin food and fuel...

[aweissnet]

Homeless numbers are rising. Soon each locale will have to have parks allocated for the homeless. The availability of credit made available the last few decades HID (intentionally I believe) the growing disparity between inflation and the wages which did not, for the most part, keep up. When credit goes away, all you're left with is a pittance of a wage, and the dominoes will start to fall.

The economy will continue to dive, as these consumers will be pretty much out of the economy. Dominoes fall. They can't help it. Nothing will stop this.

Is America too big to fail? No, capitalism is a failure, and it is destined to.

[Professor Zoom]

I'm not trying to make this a Europe is better than America comment, but... Have you ever noticed how in France, the people are always having some sort of protest over something? That's something we don't see a lot of here. Maybe, if we're so angry about this, we should protest. Why doesn't everyone not pay their credit cards and go out to the streets and show the banks and government that this is not acceptable. The problem is that the majority of this country is scared to do something and just wants to play arm chair quaterback instead of really doing something about it. The banks and government know this. This is why the banks keep raising rates, and it's why when you send a letter to your representative in government, they send you a stock reply back not addressing your concern. We're mad, but we're not mad enough

[Samalabear]

Yep. I've been the recipient of a few "canned" letters myself. Americans are not angry enough yet, for sure.

[simplejourney]

It is a choice to have a credit card. Protesting for better rates on a credit card only embolden the credit card companies by implying that we can not survive with out them. You can not achieve anything without sacrifice and it is time for us to adjust our spending habits.

[aweissnet]

Americans are easily placated and pacified. And if not, they'll zone out on a beer, a paxil, and TV at the end of the day.

[RedneckDem]

My wife has been an HSBC credit card customer for about 10 years. She's been offered steadily increased credit limits and has a fixed rate of 8.99%, which is not unreasonable. Anyhoo, she just received a nice letter in the mail informing her that her fixed rate is now variable and the rate is moving to 18.99%. No particular reason stated....
The only solution here is a mass default to rebel against this usury. If enough people default, this unsecured debt will just go away since all of these companies have limited means to try to collect, especially if there are tens of millions in arears. Itmay force the companies to drop their rates back down and we can pick up where we left off.
This is rediculous. Rates across the board are at their lowest ever, yet these companies taking the gov't's dollar are hedging their profits off of good paying customers.

[Graywolf48]

Students shouldn't have credit cards, unless of course their parents want to pay the bills. Most of these young people, unless they come from wealthy families, are going to be saddled with huge student loan debt for years to come. With a bad economy and dwindling job opportunities, the outlook is not bright. Every dollar in debt, especially the ever compounding burden of credit card debt, is a link in the chain of slavery. You become indentured to the banks and credit card companies and it will take you years to break free. Sadly, many will never break free, and that is a shame. VISA, MC, Discover, et al have literally become the "mark of the beast". If used wisely, they can serve. Used unwisely and you become their servant. Forever and a day.

[mother]

Where are our legislators? I have written to all of them from my district, and have received generic replies that do not address this issue. Bring back usury laws. The credit card companies are simpiy greedy and do not care one iota for anythibng but $$$. And apparently our legislators do not care on iota for anything but giving our $$$ to these greedy banks.

[piquet]

Get a job and work your way through like the rest of us that don't have family welfare.

[solid]

That's what most people do Miss Uncompassionate. There's no way you're going to make enough money in our third world service economy to pay off tuition, books, and room and board. Hence, students have to put enormous amounts on their credit cards and the loan sharks feast on their carcasses.

[jinsei]

How do you make the $40K/per year at least needed to pay tuition and support yourself while studying full time (and hopefully learning)? You would be wasting an educational opportunity because you would not be able to fully concentrate and try new things. Your advice is unrealistic, and impractical, and not rooted in any true perspective of the situation.

[Samalabear]

I did that. I worked my full-time job, went to school full-time, tried to take care of my son full-time. I was going for a graphic design degree. Yes, I earned a 4.00 GPA in 9 months and 45 credits later, but I burned out and couldn't continue. I'm still paying off the loan and I have nothing to show for it. BTW, I was 42 and I was finally going to college for the first time and hopefully it would pay off in some area, much better than my current job, which will never get any better and I will never make more than the paltry sum I do now. Oh, well, that dream had to die.

[totaldisbelief]

I'll propose that Everyone stop paying their credit cards. Break the Banks!

[alted1663]

A slave from the cradle to the grave.

[local21]

I'm more concerned about college grads finding good paying jobs.

[skatscan]

Has the Maff-ee-ah taking over the banks without our notice?

[totaldisbelief]

The Banks are the Maff-ee-ah­.. they don't call them Banksters for nothing.