Should You Use Credit to Cover Education Fees?

If there is one thing that is certain, it is that costs will rise. One place that has seen yearly increases is college tuition. Is credit a viable way to tackle these costs?

With rising college costs, it is hard for parents to get ahead of the game – especially if they have more than one kid getting a bachelor’s degree. Many college kids these days are taking matters into their own hands. They are using credit to pay for their needs.

Credit card companies are still marketing to college kids but they have gotten more responsible. Credit cards these days offer perks for ownership and are better at approaching students who have some means of paying the bill each month. 

So, why is credit card debt on the rise? Well, college students are paying for books, lab fees, parking spaces, and other costs with their credit card. It seems like a good short-term plan but it can have long-term effects on their credit and their parents’ credit.

For one, credit cards carry higher fees than more traditional education loans. With an interest rate of 18% or more, constantly making charges can result in paying back almost twice as much as was owed in the first place when it is all said and done.

Also, kids are having a hard time keeping up with the bills. A monthly minimum of twenty dollars because you bought some clothes at the mall is a lot different than paying $200 or $300 a month because you charged thousands of dollars in books on it. Besides school work, kids are worrying about finding the income to pay off their cards. If they aren’t, then the burden falls to their parents.

This is a worry because college students are starting their lives in debt. Once they leave school they have credit card bills. Unlike loans, there is no grace period or deferment if they jump right into graduate school.

There are other options that are more palatable than using credit cards.

• Taking out a home equity loan – This option needs to be carefully considered before signing on the dotted line. You are taking equity out of your home which you might need later. And, even then, the equity may not cover all of the costs of a four-year education.
• Use educational loans – The government offers many loan options for education: Stafford loan, PLUS loan and private loans. The interest rates are lower as they are being used for education. Each has a different payment structure so investigate which one is best for you.
• Educational IRAs – 529 plans allow parents to save money for their children for college. Even the grandparents can get involved. And, best of all, the accounts can be transferred to another sibling if it is not all used by one child. It is never too late to start saving. Ask for contributions to these plans as birthday and graduation gifts.

Credit cards are not necessarily the best way to pay for college, yet many college students have turned to them. Before they get in too deep, use other methods to subsidize their education.

That’s it for now. Until next time Divas, wear your heels well and Be Blessed!

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