Between inflation and new borrowing caps, college students are facing severe budget gaps - and turning to credit cards for essentials like groceries and gas

College students who can't afford basic necessities are increasingly turning to credit cards to make ends meet.

Kayla Hill finds that she's reaching for her credit card a lot more lately.

Sometimes it's for one-time expenses, like an unexpected dental procedure that costs several hundred dollars. But more often, it's for everyday purchases that are getting more pricey, like paying $20 more for a tank of gas for her Nissan (JP:7201) $(NSANY)$ Sentra than she paid at the beginning of the year.

The junior at Morgan State University in Baltimore has been occasionally delivering food for DoorDash (DASH) while she looks for steadier income, either through a work-study job at her school or "just a regular grocery-store job," she said. In the meantime, she's accrued more than $5,000 in debt across three credit cards, even though her entire tuition is covered by scholarships and loans.

"I'm very stressed out about my debt," Hill, who saves on housing costs by living with her mother, told MarketWatch. She worries that her high utilization rate could hurt her credit score, which is "connected to quite literally everything else I would want to do," she said, like the interest rate on a future car loan.

Hill is part of a growing group of college students relying on credit cards to make ends meet. Credit-card use among undergraduates jumped to 54% in 2025, from 43% in 2018, according to the nonprofit higher-education research firm Trellis Strategies. Nearly 9 out of every 10 students who used credit cards reported doing so to pay for basic living expenses such as food, housing and gas.

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Years of rising living and college costs have left many with little room in their budgets. Now, new caps on federal student loans could put additional pressure on students to turn to high-interest credit cards to cover their daily expenses.

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"Our data doesn't show that these students are being irresponsible. Students are largely paying on time," said Allyson Cornett, Trellis Strategies research director. "The expenses have exceeded their resources and so they're paying what they can," she said, noting that credit cards are being used to bridge the gap.

Inflation and new federal loan caps are turning more college students toward credit cards

The average credit-card balance for college students was $2,100 in the first quarter of 2025, according to a WalletHub study - a 5.5% increase from $1,900 a year earlier.

Higher prices continue to squeeze students' budgets. Food prices were up 2.7% in August from a year earlier, while medical-care costs rose 1.6%. The average tank of gas cost about $60 to fill in early October, up from $43 a year earlier, according to GasBuddy.

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The cost of college itself has also risen. From the 2015-16 school year to 2025-26, the cost of tuition at a public, four-year university rose about 26% to $11,950, while the cost of room, board and meal plans jumped 37% to $13,900, CollegeBoard data show.

Some students are using credit cards to finance these rising costs, too. Nearly a quarter of students were using credit cards for tuition and other payments made directly to schools in the 2023 fiscal year, according to the National Association of College and University Business Officers - a figure that rises to more than 60% for students at two-year colleges.

This year, some higher-education and consumer-finance experts expect students will face funding gaps from new caps on federal loans that they could use credit cards to fill. Graduate students, in particular, face new annual borrowing caps of $20,500 to $50,000 a year, depending on the degree. Previously, grad students could borrow up to the full cost of attendance as determined by the school. Parents are also facing a borrowing cap this year of $20,000 a year per dependent student, and no more than $65,000 total per student.

Credit-counseling services are seeing more young people come in for help managing their credit-card balances. Money Management International has seen a 35% jump year over year in Gen Z clients who have an average unsecured debt of $20,152, according to Ted Rossman, principal consumer-finance analyst at the debt-counseling nonprofit. This debt balance is lower than older generations seeking out credit counseling at the firm, but it's rising 12% annually.

"This is a pervasive problem. This isn't a two-year problem or a four-year problem. It seems to be something that's happening across the higher-education landscape," Trellis Strategies' Cornett said. "And I think it's almost inescapable with the cost of living combined with the cost of attendance."