Tough Lessons in Student Credit
Life Lessons is unfortunately not a required class in any general education curriculum of colleges in the United States. This is a sad fact, considering the tough lessons in student credit that many of us learn the hard way. Completing college with that fancy degree is often offset by the incredible amount of debt that has been mounting since freshman orientation.
The way people often have to learn important lessons in student credit and debt is during the crunch of repayment of school loans as well. The credit card debts seem to be some far-off entity that the student doesn’t quite enter into their reality until it is too late. The American economy is heading for a real recession, and one of the biggest contributors is credit difficulties and debts that end up in bankruptcy court.
The lessons in student credit options need to come before the student is ambushed by credit card offers. Most figure they will just be adding a little bit of debt to their current student loans, and will easily pay it off along with the financial aid loans. They do not have the concept of the amount they will actually be repaying, and the monthly obligation it will require. They see instant gratification, not lifetime of debt.
The most important lesson in student credit is the interest rates. These are the tricky little numbers that increase the cost of everything. The loan amount the student needs may seem manageable to pay off with their expected income. Yet if that loan is assessed an interest rate at the average level, then it is compounded quarterly, some students will end up paying more in interest than the principal amount borrowed in the first place.
This applies to credit cards as well. The interest on a credit card balance is usually calculated every month. So the date with that awesome cheerleader that originally cost the student $50 will become $64.50. Then the next month when only the minimum payment is made on the credit card bill it becomes $83.21. That is quite a tip for the credit card company when all they did was pay your $50 bill for dinner. They got $33.21 because that student didn’t stop at an ATM and pay with cash. The little errand that took 10 minutes was worth a lot more to the credit card company.
Teach your high school children the important lessons in student credit and credit card debt. They need the information, and you need the peace of mind.
Student credit cards.com @ March 28, 2008