Student Loan Debt vs. Credit Card Debt

Posted on by Forest in Debt, Saving Money & Finances

Student Loan Debt vs. Credit Card Debt

Last year it was reported that student loan debt had finally exceeded consumer debts that include credit cards in the USA. According to an article on USA today Student Loan Debt was at an astounding $850 billion with consumer debts at around $828million. I don’t have the current figures but over a year on I would well imagine the gap is growing due to the ever growing costs the come with trying to get ahead in life by getting a university education.

Many students are leaving school with $40,000+ of debts sometimes a mix of student loans, private loans and credit card debt that will plague many of them for much of their life.

Note: I’m not a financial advisor so information in this article is opinion only.

It sets up a kind of trap where the graduate becomes a slave to having a job at all times to make payments. The rising costs of university and it’s associated activities means that it’s becoming increasingly impossible for students of normal backgrounds to study without getting into these large sums of debt. Considering the great social pressure that stands in the USA today to get a university qualifications a conspiracy theorist could say it’s an indirect form of slavery! Anyway this post isn’t about that so I better not veer too far off track….

In theory a student loan is a better form of debt than any consumer debt. It’s use is for something that should in a better economy allow you to excel at your chosen career so predicted pay back should be easy enough. Subsidized loans come with good grace periods and reasonably low interest. Unsubsidized loans however can build interest while you are at school even though you are not having to pay until graduation so the student needs to be aware of these aspects.

CreditCard debt can be possibly the worst form of debt one can have although in reality seeing as it is not attached to any of your possessions like a home loan it isn’t always as risky as you may think. I’m not encouraging anyone to get into this kind of debt at all but if borrowing is a must you may find a year of interest free on transactions may be a cheaper option in the long run than extended an unsubsidized student loan. However when it comes to time to pay up interest is super high and the CC companies can be an awful bunch to deal with, you would hope that if you have trouble paying your school loans that they will be less hard on you (I am not sure that rings true though!).

As far as I am concerned all debt is equally as bad. The way I feel about debt in my current state of mind is the way some people are so anti alcohol that a low alcoholic beer is just as bad as drinking an entire bottle of absinth! Debt is bad and should be avoided at all costs, however I try not to be that irrational.

Student Loan Debt and Credit Card Debt both have the chances of crippling you if you don’t life up to your predicted earnings in the future and if you borrow way in excess of what you’ll ever be able to pay back. It’s easy as a student to borrow as your potential to payback is high. You probably will find a way to payback but it will restrict things like your ability for entrepreneurship, travel, jumping between careers to find out exactly what you want and other activities that in young life could benefit your whole life ahead of you.

My advice, stay away from all debt, save up for school and stay at home for a year doing nothing put stashing cash away (see my article Graduate College With Zero Debt). If you are not at school don’t allow yourself to bow into societies pressure to buy shiny things, holiday multiple times a year etc etc at the expense of your financial ability. If you can’t afford to lay the cash on the table don’t do it.

I would love to know what you think and any opinions you have on these matters.

Thanks for reading - Student Loan Debt vs. Credit Card Debt

Articles of interest:

Student loan debt exceeds credit card loan debt in USA.

Finish College Without Student Loan Debt.

Student Account Checking Banking That Fits A Student Lifestyle.

Paying Down Your Debts To Increase Your Credit Score.

Pay Off Highest Interest Or Highest Balance Credit Card – Analysis Paralysis

Tags: credit card loan debt, student loan debt