Credit Debt Failure

Posted by: Meredith K. | Dec 29,2007


Here’s a new one to me, and I thought I was pretty well-versed in credit card issues affecting college students.  A 2005 survey showed that more students drop out of college due to credit card debt than due to problems with academic failure.  Pretty shocking.  

In one sense, this is good news.  Good?!  How?  Because if a student is dropping out, it’s probably to get a job to deal with a growing debt problem.  If this is the case, this is far better than staying in school and defaulting continuously on credit card accounts.  This could potentially be far worse for your financial future than not getting a degree.  Even if a degree can help you get a higher-paying job, this will be balanced by the high interest you’ll be paying on outstanding debt.  

A year of defaults in college can severely cripple your ability to buy a home, rent an apartment, buy a house, or even get a new credit card in the future.  The alternative is to go into bankruptcy, but be warned that a bankruptcy can also lead to the above problems, even if it helps lessen your debt burden.  

The answer: don’t use your cards unless you have an immediate way to pay them off.  Incredibly, some college students get a credit card with no income whatsoever.  It’s bad enough only paying the minimum, let alone nothing at all.  I would recommend that if you get a credit card you also get a part time job.  You shouldn’t have one without the other.  The trouble with some college students is that they have student loan debt and an on-campus work-study job, leaving limited time to get another income.  Often college students need to get an internship, rather than a paying job.  Finally, there has to be some time leftover for going to classes and studying.

It’s not surprising then that so many students are falling into credit difficulty, even if they’ve been reasonably responsible with their cards.  Let this be a warning both to those who spend frivolously in addition to those students who don’t overuse their cards.  

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