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Kimberly Amadeo

Student Loans Driving Credit Boom

By February 9, 2012

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The Federal government's student loan program is one of the country's biggest lenders, according to the Federal Reserve's Consumer Credit report. In December, the government held $425 billion in school loans, less than the total debt held by commercial banks or finance companies, but more than credit unions or savings and loans. This is up dramatically from the $98 billion it held in 2007. That means more Americans can improve their education, reducing income inequality -- at least for them!

The government's education loans are part of non-revolving credit. This category also includes loans for automobiles, furniture and other personal loans. It's called non-revolving because it's designed to be paid off in 2, 3 or 4 years. All told, non-revolving credit skyrocketed 11.8% in December. Americans now owe $1.697 trillion, more than at any other time in history. On average, each family now owes $14,260 in personal loans. However, if a good chunk of this is school loans, that's a healthy investment that will benefit the borrower and the economy.

Credit card debt only rose a 4.1%, reflecting a healthy Black Friday holiday shopping season with shoppers more likely to use  debit cards and cash. Credit card debt, at $801 billion, is still lower than it was before the 2008 financial crisis, and just a shade higher than in 2010. However, it's still a lot -- on average, $6,731 per household! (Note: This estimate is based on 119 million households or 308.7 million / 2.59 persons per household. Source: U.S. Census, 2010 Data; Average Household Size)

However, this good for the economy. Why? Personal consumption is responsible for 70% of Gross Domestic Product. (Source: Federal Reserve, G.19 Release, February 9, 2012)

What It Means to You

If you are one of those who borrowed to go back to school, good for you!  Hopefully, you are getting trained for industries that are creating jobs, such as health care,manufacturing and retail. This will keep you from being one of the structurally unemployed.

If you needed to rely on credit cards to complete your holiday shopping, don't worry. You can get out of debt with these resources from other About.com guides:

How to Reduce Credit Card Debt

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