Making the situation worse this year is the fact that most of the credit card companies are raising interest rates and fees ahead of the new Credit CARD law to take effect on February 22. The new law limits when the credit card companies can raise interest rates and fees so the banks are making sure they are positioned where they can collect higher rates after the law takes effect.

Those Christmas purchases are now going to cost a lot more and the goal, according to financial planners, should be to pay off those credit cards as quickly as possible. The New Year is traditionally a time to make resolutions and review financial status. Already into the middle of January, it is an excellent time to look at current debt status with a critical eye. One of the steps many consumers are taking is reviewing the previous year spending patterns before evaluating ways to consolidate current debt. Even better than consolidation is paying off debt whenever possible.

The reason spending patterns are reviewed first is because some consumers borrow from one source to pay off credit card debts only to create new balances again through overspending and charging. But the new interest rates and fees that credit companies are charging are proving to be exorbitant. Even people with excellent credit scores are getting notification their interest rates are going up as high as 26% and sometimes higher.

Financial planners recommend that consumers pay off the credit card debt as quickly as possible. Credit card companies have lost billions of dollars as the recession lingers on and now they are faced with tougher federal regulations on rate changes. It is not surprising these companies are looking for ways to preserve revenue.

It is surprising though that many consumers charged their Christmas purchases despite the recession. A better plan for the New Year is to buy Christmas gifts throughout the year and avoid charging any gifts in 2010. The author of “Life or Debt 2010” is Stacy Johnson. He points out that, “Banks and credit card companies aren’t your friends.” That can be hard to remember when reading the nice advertisements that come with the cards claiming to help consumers manage their expenses by supplying credit.

The exorbitant interest rates are not being well received by consumers or Congress. There has been discussion about moving up the start date of the new Credit CARD law though implementation is only five weeks away now. But consumers can take charge of their spending habits and debt right now. Paying off the credit card balances is the first step. The second step is making sure spending is managed in a way that reliance on credit cards to balance budgets is minimized.

Beginning next school year, loans will be replaced by scholarships at Swarthmore.  The change is likely to affect more than 700 new and current students.  That’s half of the school’s enrollment.

The dean of admissions and financial aid, Jim Bock, was quoted as saying, “Loan-free awards will give our students the freedom to explore all career choices because they won’t need to worry about how they will repay their college loans.”

Current tuition, room, and board at Swarthmore run $45,700 a year.

Swarthmore’s announcement follows Harvard University’s decision to replace all student loans with grants.

As a result, Harvard will spend as much as $22 million more each year on student aid.  The policy is aimed at middle- and upper-middle-class students.

The University of Pennsylvania and other colleges currently have plans in place that permit low-income students to attend college virtually for free.

The changes in financial aid policies arise from an effort to seek an economically-diverse student body.  Universities are also trying to answer critics who say that the cost of a college education is too high.

The moves also come in light of the controversy over student loan programs.  Some programs have been accused of being corrupt – student loan firms are alleged to have cultivated improper relationships with college officials.

In addition, a number of students are graduating from college with almost insurmountable debt loads.  In some cases, students end their college careers with tens of thousands of dollars in student loan debt.  As a result, some college grads are postponing marriage, delaying children, and giving up their dream of owning their own homes and in effect need to consider debt consolidation loans to improve their personal finances after graduation.

Observers are hoping the changes in student aid packages will help to alleviate the problem, allowing college graduates to enjoy a higher standard of living.

The Federal Reserve reports that consumer borrowing increased at an annual rate of 7.4% in November.  That’s much higher than the 1% increase reported in October.

The segment of borrowing that includes debt from credit cards skyrocketed at a yearly rate of 11.3%.  That’s a 6-month high.  The surge apparently means that consumers are relying more heavily on credit cards, now that home equity lines of credit are drying up.

Auto loans also rose in November, increasing at a rate of 5.1%.  Interestingly enough, car loans had decreased 3.5% in October.

Total credit is now up by $15.4 billion—that’s a great deal more than the $8.5 billion that had been predicted by forecasters.

The housing crisis appears to be largely responsible for the increased credit card debt.  Home prices have been falling and standards for home loans have gotten stricter.  As a result, it’s become more difficult to sell a home at a good price.  Therefore, a number of homeowners have been tapping into their credit accounts in order to stay afloat.

Total consumer credit now stands at $2.51 trillion, which represents a record.  The report by the Federal Reserve gauges debt not secured by real estate.  That means that mortgages are not covered in the report.

The housing market is not expected to recover until at least the middle of 2008.  So far, the nation’s housing troubles have not led to a full-blown recession, although that’s still a possibility.  Some observers are urging the Federal Reserve to cut interest rates once again in an attempt to jump-start the housing sector.

Some pessimistic forecasters are predicting that house prices will not recover until 2010.  That’s particularly bad news for those who need to sell their homes this year in order to relocate to new jobs.