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Debt, Both Credit Card and Student Loans – Some Quick Advice

How to manage credit card and student loan debt

How you manage money while you are on campus really affects life after college. By and large, students have been given NO personal finance training prior to college, and little to none on campus. Yet they have a mountain of decisions to make.

  • The average credit card debt per students in 2013 was $7,000 (not students loans, credit cards!) – CNN
  • 84% of all students have a credit card – NBC
  • 50% or more of all students have four or more credit cards – NBC
  • 5 years is how long it will take to pay off a credit card making minimum payments – Based on 23% APR paying 3% of the outstanding balance
  • With $10k in credit card debt you would pay $12,485 in interest totaling a whopping $22,425 in payments - Based on minimum payments at 18.9% for 24 years

On campus, you need to become financially savvy. You don’t have money to invest, but you can be financially astute and avoid hurting yourself.

  1. Install and master MINT. It is free. I have recommended it to thousands of students, and I have never heard an adverse word about it. Why do you need to do that from college:
    1. Your life will never be as financially simple as it is now (so it’s easy to deploy and master);
    2. You are surrounded by technology resources so if you need help it is on the ready;
    3. You have more discretionary time in your life now. If you think NO that’s not true, I am so busy at college. Let me break it down for you: A career that is going places is like finals week for the rest of your life;
    4. It will remind you to pay your bills on time and that will help you to not hurt your credit score and avoid penalty fees.
    5. Finally, all things start with awareness. With MINT you will have your whole financial position in the palm of your hand.  Nothing but goodness can happen from that.
  2. Protect your credit score
  3. Leave with as little debt as possible. College has a very strong ROI (return on investment) so if you need to take on debt to make it happen, do so, but minimize it (take as little as possible):
    1. Make sure you control other spending. When it comes to housing and other living expenses there are always ways to do it for less.  Since you are borrowing funds, you must be driving down spending during your college years;
    2. Work while you are at school. The research says that if you work 20 hours a week or less you end up with a higher GPA and are more apt to graduate on time. Working drives down borrowing.

You need to know the land you are headed for. You will get a job after college and then you will make $X a year. Now subtract:

  • Taxes
  • Health insurance
  • Student loan debt
  • Credit card debt (if there is any)
  • Something for long term investment (usually a 401k)
  • Then the rest you have it to live on

Student debt is bad enough, but when you pile on high interest credit cards, it is financially ridiculous. Be careful!

I often tell students, “The opposite of success is not failure but conformity.”  If you look to your peers and say I am doing what everyone else does, then you are probably navigating in troubled waters. As horrible as it is to say, average behavior and average financial performance leads to horrible long term results. Dave Ramsey says, “If you live like no one else, later you can live like no one else.” File that under wisdom.

Student Retirement Calculator Carve a realistic strategy to millions in net worth at retirement Note: It may take 20 seconds to load

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