Americans borrowing more for student loans and spending less on credit cards, report shows

On Thursday, February 7, the Federal Reserve released a report showing that in December 2012, consumers nationwide increased their borrowing for items like student loans and automobiles. At the same time, however, the number of purchases made using credit cards decreased markedly for yet another month as American’s worked to lower their short-term debt burdens.

According to the research, consumer borrowing rose $14.6 billion from November to December to a total of $2.78 trillion –  the highest level the Federal Reserve has ever recorded.

The increase was attributed completely to student and automobile loans while other indexes remained stagnant, if not decreased. Borrowing in the category that measures those loans increased $18.2 billion to $1.93 trillion, which is the highest jump recorded by the Fed since November 2001.

Since July 2008, credit card debt has decreased roughly 17 percent, down $3.6 billion nationwide. Currently, the national credit card debt sits at about $850 million.

The Great Recession made consumers more wary of increasing their credit debt as a number of factors, including higher Social Security taxes that reduced the average amount of take-home pay for homeowners, made short-term borrowing a riskier venture, according to ABC News analysts.

“High unemployment and the increase in payroll taxes will leave households reluctant to run up big credit card balances,” said Paul Edelstein, director of financial economics at Global Insight, in an article from ABC News. “An unwillingness to take on this form of debt will limit the speed at which consumer spending will grow this year.”

Long term debt like student loans, however, can actually improve a borrower’s credit score if handled responsibly, and with the cost of college increasing every year, more and more borrowers have no choice but to take out student loans to aid in paying for college.