Learning About Debt

You may have seen recent reports and news stories about student credit card debt. Or worse, you may be experiencing it firsthand. In a USA TODAY article dated February 13, 2001, cases of debt overload were commonplace.

• A University sophomore with $20,000 on 14 credit cards
• Former student with $10,000 on credit cards and $12,000 in student loans
• A surgeon with nine years of school, five years of residency, and $400,000 in loans

These are not isolated cases. A Nellie Mae study indicates that student loan defaults may be partially attributed to student credit card debt. No real surprise there. If you don't have money, you don't have money…no matter whom you owe.

The study showed the average credit card debt to be $2,748 in the year 2000, with close to 25 percent of students owing more than $3,000 and about 10 percent owing more than $7,000.

According to the Nellie Mae study of last year's student loan applicants:

• Students held an average of three cards
• 78 percent of students had at least one credit card
• 32 percent of students had four or more cards
• 95 percent of graduate students carried cards

As you can see, the majority of students are graduating with more than just a degree. Most are graduating with burdensome debt.

So what's the moral? Debt can sneak up on you quickly; it's called "creeping indebtedness." Be aware that signing for that student loan is signing an obligation to repay. The first bill arrives a month after you graduate…think of "Commencement" as commencing of the bills.

And remember...getting a free hat, Frisbee, or t-shirt to sign up for a credit card may end up costing you more than you can expect.
Use credit wisely and it can open up a road of prosperity. Use it foolishly and it can be the road to poverty.