The price of a college education has risen dramatically in the
last ten years. Prices of tuition, room and board and books have
increased much faster than the rate of inflation, and students
and their parents have struggled to find ways to pay for these
increases.
A recent study by the Smith College Women and Financial
Independence Program found that nearly one quarter of college
students are using their credit cards to pay for some of their
college expenses. This is a poor choice, as we shall soon see.
Unlike a generation ago, most students today have at least one
major credit card. The lending industry has aggressively
targeted college students and made it very easy for them to
obtain cards. The problem is that most people of college age
have relatively little money management experience and tend to
use the cards rather foolishly.
About ten percent of college students have balances on their
credit cards of at least $5000, and much of this debt is
attributable to using the cards for college expenses.
The main problem is the interest rate on credit cards, which
tends to be much higher than other borrowing choices for
tuition. The Federal Stafford student loan program offers rates
for tuition in the neighborhood of 5%, and that's after an
increase that recently went into effect. Five percent is a
dramatic improvement over the 20% or so that one might pay using
a credit card.
Other options are available. Some universities will allow
payments; students should inquire to see if they can simply pay
on installments. Even if interest is added, it undoubtedly will
be a less expensive option than paying by credit card. There are
student loan programs available for the parents of students at
favorable rates that are only slightly higher than those for
Federal student loans.
Students need to understand how to use credit cards responsibly.
The best use for credit cards is for a purchase that can be
afforded immediately, not a long term purchase. Buying textbooks
with a credit card is OK as long as you can pay the bill when it
comes at the end of the month. Putting a semester's tuition on
the card, with no idea as to how or when it might be repaid, is
a poor choice.
Students who develop bad spending habits early are more likely
to have problem debt down the road, and may be headed towards
early bankruptcy as their spending hurts their credit report.
Anyone who has questions about how to effectively pay for
education expenses should contact his or her school's
administration. They can point out which department or
departments may be able to help assist with expenses in a way
that won't drive students straight into a life of problem debt.
About the author:
Talbert Williams offers debt consolidation, debt reduction,
credit card debt referrals and advice. For more information,
articles, news, tools and valuable resources on debt solutions,
visit this site:
http://www.1debtfreedom.com
