Students sucked into a credit, debt trap

In a time when the economy is suffering and the need for some kind of post-secondary school education is high, it is no wonder that the rate of student debt is rising dramatically.

According to a State Public Interest Research Group between 1999 and 2000, 64 percent of college students graduated with some kind of debt. Furthermore, the average total debt including credit cards, student loans and other obligations has nearly doubled during the last eight years to a $16,928 average per student. This debt can follow some students through the rest of their professional careers and lives.

The same research project found that 39 percent of those leaving college with debt have to commit 8 percent of their monthly earnings to that debt alone.

A main contributor to the overwhelming amount of student debt is credit cards. According to a survey conducted this year by a national student loan provider, Nellie Mae Corporation, 83 percent of undergraduates have at least one credit card.

In fact, the corporation found that 47 percent of undergraduates have four or more credit cards.

Credit card companies have teamed up with companies that gear to a college age-group by offering special deals in those businesses if a credit card is used to purchase merchandise from that industry. Visa International Credit Card Company, for example, offers special deals in businesses including Sunglasseshut.com, NFLShop.com, Starbucks, Gap.com and Sketchers to encourage credit card use.

These promotions and other schemes to promote credit card use among college students play a role in the $2,300 of average credit card debt per student as reported by Nellie Mae Corporation.

Despite these facts, a properly managed credit card can help students establish good credit that could be a useful asset in filing for car loans, house mortgages, and many other large financial moves that could affect one’s entire adult life.

Many experts suggest that gaining good credit can be done easily by strictly committing no more than 15 to 20 percent of one’s total household income to paying minimum credit card payments.Lewis Schiff, a writer for the CNN column “Armchair Millionaire,” stated, “Credit cards for college students are a double-edged sword. Used properly, they can help a student build a good credit record by the time they graduate, as well as providing security for emergencies. Used improperly, they will land students in a pile of debt (along with a bad credit rating) right when they are starting out and can least afford it.”