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Generation Owe and Generation Debt – these are only two of the names that have been given to the generation of young people graduating from college with outstanding amounts of debt for expenses incurred through college including cost of living and tuition.
More and more of this debt is being incurred on credit cards with increasing interest rates. What’s the reason for these high interest rates? The majority of these students hold student cards that have high interest rates for make up for the lack of credit that the students have when being offered the cards.
Not only are college students getting mixed up in tens of thousands of dollars in student loan debt, these students are coupling this with credit card debt paying for the “wants” rather than the needs.
What does this mean for the finances?
Students are unable to put extra strain on their income such as a mortgage payment or a payment for a new vehicle as they are paying a high amount each month towards credit card debt and student loan premiums.
Although students are granted a six month transition period in which the payments are temporarily suspended, in most areas – this is not enough time. In six months, most students are not working in the profession that they have spent the last four to six years studying in.
Since 2004, 33% of students graduating from a four year college are carrying a substantial amount of student loan debt, up from 33% that has been measured only ten years earlier. This number is only going to get higher as tuition and the cost of housing food and other necessities rise.
How are students dealing with this credit card debt?
New Graduates were asked how they were going to tackle the debt – and here were some of their answers:
“I am going to put off buying my first home until I am ready to save a down payment and pay my debt. I should be ready in about ten years”
“I am going to live at home, drive my used vehicle and try to pay double the minimum monthly payments on my loans and credit cards to get rid of the student loan debt”
“I am going to look into consolidation loans for my $74,000 I have racked up in debt while I was getting my degree”
Sounds like these people are becoming responsible adults willing to make the necessary adjustments to their budgets and lifestyles to pay down the credit cards.
Consolidation loans can be helpful to create one monthly, lower interest payment from several creditors and cutting down on expenses helps – but are these really the methods that students are forced to use when graduating? It’s true, they are.
Which lesson should you take from this?
Don’t couple credit card and student loan debt, it’s always a bad equation.