Consumers scramble to pay crrefinance home loanedit card bills, let everything else slide

In these tough economic times, people are leaning on their credit cards more than ever. So when it comes time to decide which bills to pay, those are the ones that make it to the top of the pile.Credit reporting agency TransUnion reported Monday that credit card delinquency rates fell in the third quarter, continuing a drop-off that began a quarter earlier. Average credit card borrower debt fell by 1.87% to $5,612 from the previous quarter’s $5,719, and down 1.71% compared to the third quarter of 2008. But this is not a sign that the economy is improving.Clifton M. O’Neal, a TransUnion spokesman, tells DailyFinance that many people are keeping their credit cards current because they need access to them to pay for their living expenses. “Consumers are wanting to keep their relations good with their credit card holders so they can continue to have access to that liquidity,” he says.Other types of debt obligations are being shelved. Officials at the Center for Responsible Lending estimate that one in 22 American families is in the process of losing its home, up from one in 34 a year ago. The U.S. is now on track to have 2.9 million foreclosures. Overall foreclosure activity is slowing, though in October it showed an 18% year-over-year gain. As my colleague Douglas McIyntyre noted, nearly a quarter of all U.S. home mortgages are “under water,” meaning the outstanding balance on the loan is more than the house is worth.Recent College Grads Taking it on the ChinAmong the people hardest hit by the recession are recent college graduates. The average debt level for a graduate of a four-year college in 2008 was $23,200. It likely went up this year, just as it has for the past few years.According to NPR, “An absolutely dismal job market has driven the student loan default rate to about 7%, nearly twice what it was in 2006. About a quarter of a million people who were supposed to start paying their student loans in 2007 still are not.”It may have gotten worse in 2008 and 2009 as the unemployment rate climbed above 10%. It’s no surprise that applications to graduate and professional schools are rising. Princeton University, for example, saw a 10% increase in graduate applications. Record numbers of people took the LSAT exams to gain entrance to law schools. Top universities, though, are cutting their Ph.d. programs because of shrinking endowments, making it tougher for young people to find shelter from the economic storm in academia.To make matters worse, about one in 10 community college students in the U.S. cannot get federal student loans because their schools choose not to participate in the federal loan programs, which are the most affordable way to borrow money to pay for education, according to the Project on Student Debt. And borrowers are not able to discharge private student loans through bankruptcy. Without jobs, they are not able to repay their student loans. Those who can are seeking help from their families to avoid becoming destitute. Those not so fortunate will damage their credit scores for years to come, making it more difficult for them to buy homes and cars in the future.