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More Credit Education Needed for Graduate, Professional Students, Says Nellie Mae Study

Posted on: Tuesday, 2 October 2007, 06:00 CDT

RESTON, Va., Oct. 2 /PRNewswire/ -- Now more than ever, men and women are seeking graduate and professional degrees as a way to advance their careers -- whether it's returning to college while working at a full-time job or going straight to graduate school following undergraduate studies. The payoff for the additional education is significant: Individuals with a master's degree earn on average $1.8 million more over their lifetime than that of a high school graduate, while those with professional degrees earn almost three times as much as high school graduates earn over their working lives.

(Logo: http://www.newscom.com/cgi-bin/prnh/20030617/SLMLOGO-a )

At the same time, a new study suggests that in addition to earning an advanced degree, graduate and professional students also need an ongoing educational lesson on budgeting and managing their money.

"By and large, these are savvy students who have undoubtedly weighed the benefits and costs associated with a graduate education and have elected to attain an advanced degree to better themselves and increase their earning potential," said Marie O'Malley, spokesperson for Nellie Mae, a leading originator of federal and private education loans and the company that conducted the study. Nellie Mae is a wholly owned subsidiary of Sallie Mae, the nation's leading provider of saving- and paying-for-college programs.

"However, their responses and behaviors indicate that many of them still need information on reducing credit card debt, financing graduate school, and managing money," she says.

Findings from Graduate Students and Credit Cards in 2006: An Analysis of Usage Rates and Trends shows that older graduate students carry nearly twice as much credit card debt as their younger counterparts, with just 20 percent of all respondents paying off their monthly credit card bills in full each month. Moreover, the average outstanding balance on credit cards held by graduate students has increased 10 percent since 2003 --- to $8,612.

The study sheds light on the fact that increasing numbers of graduate students are using credit cards to finance a college education. An overwhelming majority -- 94 percent -- of graduate students who responded to the Nellie Mae survey said they used credit cards to pay for some portion of their direct education expenses, primarily textbooks. Twenty-eight percent admitted paying for some portion of their tuition with credit cards. O'Malley warns that such usage may be unwise in that variable interest rates on credit cards average more than 14 percent (Source: Bankrate.com, July 2007).

"Student loans are a much wiser financing choice for qualified education expenses than credit cards, because they offer built-in deferment options, low (often subsidized) interest rates, and financial incentives for making on-time payments," she said.

Additional findings from Graduate Students and Credit Cards in 2006: An Analysis of Usage Rates and Trends include the following:

-- The majority of graduate students, 67 percent, said they took out their first card as an undergraduate student. -- Of the graduate student survey respondents, 93 percent would have liked more information on financial management topics before they started school and would like financial management education now. -- The most common direct expense for which graduate students used their credit cards was textbooks, with 83 percent indicating they had charged some portion of their textbook costs. -- Of the 28 percent who said they used credit cards for some portion of their tuition, the average amount charged for direct education costs was estimated at $5,416, almost double the overall average amount estimated for direct education costs placed on credit cards; 26 percent of those who used credit cards to pay a portion of their tuition charged at least $7,000.

"The upward trajectory of credit card debt levels as these students remain in graduate school demonstrates the need for better planning and budgeting before graduate school begins and as underclassmen," said O'Malley. "Ideally, this group should have ongoing access to financial management education and tools, and receive counseling about their financial aid options each semester."

Graduate Students and Credit Cards in 2006: An Analysis of Usage Rates and Trends is available online at http://www.nelliemae.com/library/research.html.

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Nellie Mae

CONTACT: Beth Guerard of Sallie Mae, +1-703-984-5621

Web site: http://www.nelliemae.com/library/research.htmlhttp://www.salliemae.com/

Company News On-Call: http://www.prnewswire.com/comp/827187.html

Source: PRNewswire

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