More students using credit cards, loans
Spencer Presley
Issue date: 4/28/08 Section: News
Shelnutt added that making a car payment on time could also help build a good credit history. A credit card can also act as insurance against unexpected expenses and emergencies, as long as the cardholder has the discipline to use it wisely.
Students can also check their credit history by using credit reports, which give the details on all outstanding debt an individual as accumulated. This information can help remind the credit holder of debts that might have been forgotten. Credit reports can also help prevent credit fraud by uncovering fraudulent charges.
There are three major credit agencies in the U.S. and they are each required by law to release a credit report to credit holders once a year.
Shelnutt recommended avoiding Web sites that advertise "free" reports that are packaged with a subscription pay services to monitor credit. Some Web sites offer completely free credit reports from all three credit agencies, such as AnnualCreditReport.com.
Not all students think credit cards are a good idea. April Robertson, a UA student and employee at RZ's Coffeehouse, said she feels it's better to save money for items and expenses.
"It's worked really well for my parents," said Robertson. She plans to keep one credit card after graduation, but only spend what she can afford to pay off at the end of the month.
If a debt remains unpaid for too long, it will likely be sold to a collection agency. These organizations purchase the debt that the original creditors considered a lost cause for pennies on the dollar. This will show up as a very negative mark on a credit report and can be difficult to have removed, even after the debt is taken care of, Shelnutt said.
Student loans are another potential financial pitfall. Because the payments are deferred, students might not realize the amount of debt that is waiting for them when they graduate.
"Don't take out more than you need," Shelnutt said.
Students should avoid using loans to pay for all of their expenses while in college.
The National Center for Education Statistics reported that 45 percent of the student population took out student loans in 2004. The average loan amount for a semester was $5,600.
At that rate, the average student loan total can be in excess of $40,000. At 6 percent interest, this debt will take 50 years to pay off and end up costing the student more than $126, 000, more than three times the original loan amount.
If student loans are a necessity, make it a priority to designate as much as possible to the monthly payment, Shelnutt said, because the excess goes directly toward the principle.
Students can also check their credit history by using credit reports, which give the details on all outstanding debt an individual as accumulated. This information can help remind the credit holder of debts that might have been forgotten. Credit reports can also help prevent credit fraud by uncovering fraudulent charges.
There are three major credit agencies in the U.S. and they are each required by law to release a credit report to credit holders once a year.
Shelnutt recommended avoiding Web sites that advertise "free" reports that are packaged with a subscription pay services to monitor credit. Some Web sites offer completely free credit reports from all three credit agencies, such as AnnualCreditReport.com.
Not all students think credit cards are a good idea. April Robertson, a UA student and employee at RZ's Coffeehouse, said she feels it's better to save money for items and expenses.
"It's worked really well for my parents," said Robertson. She plans to keep one credit card after graduation, but only spend what she can afford to pay off at the end of the month.
If a debt remains unpaid for too long, it will likely be sold to a collection agency. These organizations purchase the debt that the original creditors considered a lost cause for pennies on the dollar. This will show up as a very negative mark on a credit report and can be difficult to have removed, even after the debt is taken care of, Shelnutt said.
Student loans are another potential financial pitfall. Because the payments are deferred, students might not realize the amount of debt that is waiting for them when they graduate.
"Don't take out more than you need," Shelnutt said.
Students should avoid using loans to pay for all of their expenses while in college.
The National Center for Education Statistics reported that 45 percent of the student population took out student loans in 2004. The average loan amount for a semester was $5,600.
At that rate, the average student loan total can be in excess of $40,000. At 6 percent interest, this debt will take 50 years to pay off and end up costing the student more than $126, 000, more than three times the original loan amount.
If student loans are a necessity, make it a priority to designate as much as possible to the monthly payment, Shelnutt said, because the excess goes directly toward the principle.
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