Cost of Living, Not Debt, is the Biggest Issue Facing Young Adults

It’s easy to point the finger for consumers’ woes with overwhelming debt at credit issuers; it’s even easier when dealing with college students and young adults. This younger consumer demographic – generally less familiar with credit products and often still dependent on parental financial support – make the perfect victim-of-choice for consumer advocates and legislators looking to garner attention about consumer debt and the role credit issuers play in creating a situation where young adults find themselves in financial hardship.

I was recently asked whether or not I would fault credit card issuers and student loan lenders in creating a situation where today’s students graduate from college thousands of dollars in debt. Amid the current economic turmoil and head-line grabbing news of what is now a dramatically transformed Wall Street, this question regarding young adult indebtedness a very serious one, not only for students and their families, but for colleges, lawmakers, and employers.

Yes, issuers do target and extend credit cards to college students and young adults. Yes, student loan lenders do issue loans to college student as a means for them to finance their higher education, in addition to lifestyle while in college. But the question of whether or not the credit card industry and student loan lenders are helping create a situation where college students and recent graduates leave school only to be in debt misses the point.

Student loans, both federally-guaranteed and private, are an enormous financial obligation for young adults that often take many years to repay. But it is important to keep in mind that the underlying problem of rising student loan debt is not in the lending community. The problem of young adult indebtedness and associated financial burden stems more directly from the continually increasing cost of attaining a college education.

From the 2005-06 to the 2008-09 academic year, the average cost of attending a four-year public/private institution increased from $21,235 a year to nearly $27,000 a year, not including room and board. This was an increase of 26.4 percent in three years.

Other indirect educational costs, such as text books – which for years have been the most often-charged and most expensive item on college student credit card accounts – tend to average about $600 a semester, only helping add to the overall cost of attending college. The growth of private student loans, and increasing credit card balances of college students, is a direct consequence of the widening gap between the cost of an education and the amount students and their families are able to receive in federally-backed loans.