Across the nation students are hit up by credit card companies offering low interest rates and the deals can be tempting. But adding student credit cards to existing education loans may have a negative impact on students in school and after graduation day.
“While they’re still in college it is pretty common for college students to have a couple thousand dollars in credit card debt,” said Todd Christensen, director of education at Boise’s office for Debt Reduction Services, a national nonprofit organization which provides debt management and credit counseling.
“You get a credit card and you think, ‘Hey, I’m gonna get a real job in a year or two and will be able to pay it off.’ So students are graduating with student loan debt and $2,000 to $3,000 in credit card debt that is often overdue and is hurting their credit rating.”
Christensen teaches classes on spending, credit debt and budgeting trying to educate individuals on good credit habits and how to rebuild bad credit.
Often, he said, the foundations of bad credit lie in the financial decisions
“When students head off to college, a parent, usually a parent will say, ‘You need a credit card, just in case of emergency’—the definition of ‘emergency’ is very different from what the parent is thinking and what the student sees as an emergency,” Christensen said. “The parent is thinking if they get stuck in the middle of nowhere on the way home and need the car repaired or towed—that’s an emergency. The student, first weekend back to school or on campus, has a few friends stop by and say ‘Hey we’re going to a movie tonight’ and (the student is) a week and a half from payday—it’s a social emergency.”
Christensen also blames dollar dumps for damaging student credit. Spending a few dollars a day on candy or coffee doesn’t seem like much but can damage credit over time.
To combat overspending, dollar dumps and improve credit Christensen recommends the “boring way, which is also the real way: know what our spending plan is.”
But it is not just credit card debt that hurts students after college. Taking out large sums in student loans can increase student debt and make paying it back difficult.
“Daily, hourly, we get people calling saying ‘I need more student loans,’ ‘I have to pay rent,’ and are in financial crisis,” said Maureen Sigler, associate director for client services in the Financial Aid and Scholarship Office at Boise State. “As a rule of thumb you have exceeded your comfort level in repaying loans if you have taken out more than you expect to earn that first year you are out of school.”
Sigler recommends students do everything they can to educate themselves before it comes time to graduate.
“I think the federal link for exit loan counseling is excellent. It will draw in your exact loans and will show you how much you expect to pay per month and I think that is wise to do throughout one’s college experience,” Sigler said.
Students feel the weight of debt bearing down long before graduation.
“I have a ton of student loans,” said Andrew Jenkins, senior political science major. “The worst thing I think a student can do is trying to live like they did when they were at home when they should try to live like a student and get away with the bare minimum.”
Jenkins is hopeful that going on to law school and becoming a lawyer will help financially when it comes to paying off debt.
Both Sigler and Christensen agree that getting out of debt can be painful.
“There are no happy ways of getting out of debt,” Christensen said. “Getting into debt—that’s always fun. Getting out is never easy but it’s always worth it.”