2 Kinds of Debt Often Linked with Student Loans

Ask most adults what ranks as their #1 worry and they’ll most likely point to money and, subsequently, debt. Numbers don’t lie, and they’re pretty alarming; consumers racked up $2.4 trillion in debt in 2010. Not two billion, but trillion. From credit cards to mortgages, debt typically intertwines as the norm from the moment you begin your college career.

Some are sucked into the tunnel-vision of student loan debt because it’s arguably the most stressful and prevalent types of debt out there. However, other forms of debt can be equally detrimental, and may even run alongside student loan debt. The two most common of these particular debts include:

• • Credit Card Debt
    This is the most likely candidate of coinciding with student loan debt. According to NerdWallet, Americans hit $854 billion in credit card debt this year. However, some students may feel this wouldn’t apply to them. When they receive those crisp envelopes in the mail with a shiny “pre-approved” mock credit card, it may seem difficult for them to resist the allure of signing up for one. We urge any students to deflect this temptation—and you should too! Of course, it’s vital to open their eyes to the world of personal banking.There’s nothing wrong with helping your student open a single credit card account with a low limit, as long as their paycheck can cover whatever expenses they charge. Don’t be afraid to take that privilege away, either. Stressing the importance of good credit will only affect them positively in the long-run.
  • Auto Loan Debt Typically, auto loans now have a life-span of 5 and 1/2 years, but sometimes reach the six or seven year mark. For a brand new car, the average loan rate is 3.14% for 48 months. Of the $1.6 billion handed out in car title loans per year, $3.5 billion of interest is owed… Nearly twice the amount of the loan!

    Chances are your family will have enough burden with student loans, so it’s wise to avoid tacking on another loan. As a replacement, opt to buy a used car. Also, search for one with low maintenance. Repairs may end up costing you far more than expected!

When choosing loans to extract or foreseeable debt, tread carefully and research the future commitment they entail as well as the potential impact on your financial state, past and present.

Westface College Planning helps navigate the financial aid process from start to finish.  To learn how we can minimize college cost, call us at 650-587-1559 or sign up for one of our Tackling the Runaway Costs of College Workshops or Webinars.

Photo Credit: Pure Metal Cards