"What comes first - the credit or the debt?" asks Rowdy Cents.
Credit and Debt are not bad financial tools. They can be means to accomplish financial goals. It’s the mismanagement of them that may land you in a pothole on the Paseo Dinero and create an unhealthy financial future.
DEBT is what you owe when you’ve borrowed the money to pay for something. Students may have student loans, car loans, and credit cards or store charge cards. Until you pay a balance in full, what you owe is considered a debt.
UTSA undergraduate students, who graduated in 2007, had averaged just over $19,000 in student loan debt. This isn't very far off the national reports of nearly $23,000. There is nothing wrong with investing in your own future with student loans but you need to consider how much your intended career will net you in salary, and how much your student loan payments will be, once you join the world of work.
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Be cautious about accepting the maximum amount of loans offered in your financial aid packaging. Use a budget to determine just how much you need to live adequately and to pay for tuition, fees, books, and school materials and then adjust the loan amount appropriately.
(If you are awarded grants and/or scholarships, always accept them as they are not loans and you don't have to repay the money.)
- First consider a Perkins Loan, if awarded by the school, as it has the lowest fixed interest rate and the repayment (to the school) time is shorter, thus overall interest acrued is less.
- Next consider the subsidized Stafford loan, as the government pays the interest for you while you are in school, and it's a low, fixed interest rate. .
- Then consider the unsubsidized Stafford loan. Although you pay the interest while going to school, it is still a lower, fixed interest rate loan.
- Lastly, alternative or private loans are riskier with higher interest that may be variable rates, and typically the interest is paid by the student while in school. Avoid this one if at all possible!
Credit card usage is very troublesome for college students since reports indicate that graduating college seniors average having 3-4 credit cards and nearly $3000 in credit card debt. It also appears that the longer one is in college, the higher the credit card debt.
BEWARE! First-time college students are likely to get, on average, 16 credit card applications sent to them during their first year in college.Aside from the difficulties credit card debt can cause, identity theft can occur if you fail to shred your unwanted credit card applications and someone else gets them and applies using your name.
Wisely managing credit debt, by paying on time and not going over the established credit limit, will help to establish a good credit score. If you find yourself using a credit card to buy pizza for your friends, it is probably time to cut up your credit card.
Absolutely avoid using credit cards to finance your college education!
NEW ! Laugh while you learn about credit - The Funny Money Cartoon Series: Get It On Credit
Badly managing any debt may lead to any of these happening to you:
If you are feeling stressed, depressed, or suicidal over your debt situation, GET HELP NOW. Seek a professional health counselor. (UTSA students can use the Counseling Services on campus.) You may also want to seek help from a Debt Management/Credit Counseling service. The Texas Attorney General's web site has guidance for finding reputable services. Don't believe every ad you hear or see, check it out first!
Check this America Saves newsletter for strategies on coping with consumer debt!
| Advice from Rowdy Cents: Adopt a "cash only" policy and avoid credit cards; live within a budget; be a money-saver; take the most money for college in grants and scholarships, take the least money for college in student loans; try to work only part-time and on campus; finish your degree in the shortest time possible; then keep your skills current! |
PAGE UPDATED 9/02/09
