In 2008, college students utilized credit cards more than ever before, according to a new study released by Sallie Mae.

This utilization includes charging tuition as well as other direct education expenses, the student loan issuer said.

The study called How Undergraduate Students Use Credit Cards: Sallie Mae’s National Study of Usage Rates and Trends, 2009 is the fifth in a series conducted since 1998 via the student loan firm’s affiliate Nellie Mae. Sallie's affiliate analyzes the credit card use of student loan applicants.

Close to a third or 30% of students put tuition on their credit card, rising from 24% in 2004, which was when the study was last conducted.

In total, 92% of undergraduate credit cardholders charged textbooks, school supplies, or other direct education expenses, up from 85% in the previous study. Students who utilized credit cards to pay for direct education expenses charged around $2,200, which is more than twice 2004’s average of $942.

“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 and author of the study. “Students and families need to build a comprehensive budget ahead of time to cover not only tuition, but also other necessities like supplies and travel costs that contribute to the overall cost of college.”

The study found that 84% of undergraduates had at least one credit card, rising from 76% in the last study. On average, students have 4.6 credit cards, and half of college students had four or more cards. The average or mean balance rose to $3,173, higher than any of the previous studies. Median debt grew to $1,645 from 2004’s $946.

According to the report, the higher the grade level, the more heavily students used their credit cards, with seniors graduating with an average credit card debt of more than $4,100, rising from around $2,900 in 2004.

The study also found that freshmen carried a median debt of $939, close to triple the $373 in 2004. Only 15% of freshmen had a zero credit card balance, a significant dip from 69% in 2004's study, according to the student loan lender.

Many college students appear to utilize credit cards to live beyond their means, and not just for convenience, according to Sallie. Over three-quarters of these students incurred finance charges by carrying a monthly balance.

Other findings of the study include:
60% were surprised at how high their balance had become while 40% said they have charged items knowing they did not have the money to pay the bill.

Only 17% said they regularly paid off all cards each month, and another 1% had parents, a spouse, or other family members paying the bill. The remaining 82% carried balances therefore incurring finance charges each month.

Two-thirds of survey respondents said they had frequently or sometimes talked about credit card use with their parents. The remaining third who had never or only rarely discussed credit cards with parents were more likely to pay for tuition with a credit card and were more likely to be surprised at their credit card balance when they received the invoice.

Eighty-four percent of undergraduates said they needed more education on financial management topics. As evidence, 64% would have liked to receive information in high school and 40% as college freshmen.

A release about the report said that the student lender published the report to highlight the importance of educating college students regarding using credit effectively, weighing their spending decisions as well as considering their source of borrowing.

To conduct the study, researchers analyzed aggregate credit bureau reports for a randomly selected group of 1,200 student loan applicants. In addition, surveys were sent to 5,800 undergraduates, of which roughly 5% responded.

The full study could be found online at

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