Student debt

One of the biggest problems today is the accumulation of debt by students during their time spent in university or collage. Many students go to school, work part time and are considered eligible for a credit card. In fact many credit card companies offer incentives targeted to attract collage and university students and entice them into obtaining a credit card.

The difficulty with student debt is this. Most students going through university or collage take advantage of various student loan programs. These programs are offered by many institutions and are often backed in some fashion or another by various levels of government. The loans are usually given to the students to cover the costs associated with attending university including tuition, living expenses, books, and study materials. These loans are often granted on the condition that they become due and payable at a given period of time after the student has graduated. This means that by the end of a four year degree a student could accumulate $40,000 or more in outstanding loans.

On top of the above student loans we now compound the problem by giving the students credit cards. Using a credit card is a very convenient way of spending money. It is also a very easy way to accumulate debt. Unlike bank loans or other conventional borrowing methods, credit cards usually charge very high interest rates. They are designed for convenience not for economy. Students working on a part time basis earn a minimum amount of money and can ill afford large interest rates. The result is that they gradually over the course of their studies accumulate a running debt that by graduation has become a significant amount of money.

Upon graduation the college or university student is now faced with an extraordinary debt load. Usually within 3-6 months of graduation their government low interest rate loans become due and they need to start making payments as outlined in the loan contract. At the same time they have these huge accumulated debts on the credit cards that also need to be paid off. Unlike the government loans, these have a very high interest rate and are not easy to pay back. Now the question has to be asked, is the student that far ahead by attending school?

There should be no question that getting an education is a good idea. It should also be obvious that getting an education is like making an investment. You are spending money to better yourself in much the same way you might invest on renovating your home. It is a well known fact that university graduates over time earn far more money on average then do those with no formal education. The key is to ensure that students understand the dangers of improper credit card use so that they can avoid financial hardship after graduation.