Spring Break
More students using credit cards, loans
Spencer Presley
Issue date: 4/28/08 Section: News
While college may be a place for some to prepare for the future, some students are graduating in worse shape than they started, at least financially.
Many students use credit cards and student loans as a means to maintain the lifestyle they are used to while in college. But student loan payments are deferred until after graduation and credit card companies are eager to lure 18-year-olds into the system, claiming they can make college easier and more affordable.
While both can be useful and maybe even necessary, the risk to abuse a credit line is great and can possibly cause life-long damage if the privilege is mismanaged.
A 2004 study conducted by Nellie Mae Financial services discovered 91 percent of college students have credit cards by the time they are seniors.
The same study reported 56 percent of college-aged credit card owners have four or more of them and have racked up as much as $7,000 before they graduate.
Carrying such high balances can have a negative effect on the cardholder's credit report, making it hard to buy a car, rent an apartment or even get a job.
"A lot of people don't know it," said Matt Shelnutt, community outreach coordinator for Credit Counseling of Arkansas, "but some employers run credit checks on potential employees as a character reference."
Having bad credit can also affect insurance premiums and utility deposits.
"Credit cards are not evil," Shelnutt said. "The key is to pay off the balance every month. If that's not possible, at least pay more than the minimum payment."
Paying the minimum amount on a maxed out credit line is designed to only take care of the interest, leaving the principle untouched. Paying the minimum due month after month can keep the cardholder in debt for years.
Keeping a credit line and paying it off each month actually is one of the best things a student can do to prepare for the future, Shelnutt said. A high credit score can save a buyer thousands when buying a car or home because good credit can lower interest rates and decrease payments significantly.
Many students use credit cards and student loans as a means to maintain the lifestyle they are used to while in college. But student loan payments are deferred until after graduation and credit card companies are eager to lure 18-year-olds into the system, claiming they can make college easier and more affordable.
While both can be useful and maybe even necessary, the risk to abuse a credit line is great and can possibly cause life-long damage if the privilege is mismanaged.
A 2004 study conducted by Nellie Mae Financial services discovered 91 percent of college students have credit cards by the time they are seniors.
The same study reported 56 percent of college-aged credit card owners have four or more of them and have racked up as much as $7,000 before they graduate.
Carrying such high balances can have a negative effect on the cardholder's credit report, making it hard to buy a car, rent an apartment or even get a job.
"A lot of people don't know it," said Matt Shelnutt, community outreach coordinator for Credit Counseling of Arkansas, "but some employers run credit checks on potential employees as a character reference."
Having bad credit can also affect insurance premiums and utility deposits.
"Credit cards are not evil," Shelnutt said. "The key is to pay off the balance every month. If that's not possible, at least pay more than the minimum payment."
Paying the minimum amount on a maxed out credit line is designed to only take care of the interest, leaving the principle untouched. Paying the minimum due month after month can keep the cardholder in debt for years.
Keeping a credit line and paying it off each month actually is one of the best things a student can do to prepare for the future, Shelnutt said. A high credit score can save a buyer thousands when buying a car or home because good credit can lower interest rates and decrease payments significantly.
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