Student Credit Cards and Loans

Ideally, everyone could get an education for free. In the real world, unfortunately, there’s simply a limited supply of professors and schools and a virtually unlimited demand for knowledge. Scholarships and grants can be a very helpful source of tuition funds, but sometimes (too many times) it just isn’t enough. Although I think they should be used as a last resort, there are some positive features of student credit cards and student loans:

Credit Cards

Advantages

• Helps students establish credit history which will be useful when looking for a mortgage or car after graduation
• Can be used to pay for unexpected and unbudgeted expenses
• Can be used to purchase books and supplies online (often at great deals)

Disadvantages

• Interest rates are usually high in the long term, even if introductory rates are low
• Some cards have monthly fees and other hidden charges
• High credit limits can make it easy to get in big debt trouble

Student Loans

Advantages

• Low, fixed interest rate (today’s market rates are low, make sure you get a fixed loan!)
• Ability to borrow a large amount
• Possibility to get federally subsidized loans with deffered interest rates below inflation

Disadvantages

• Ability to borrow a lot means it will take a long time to pay off, and may encourage choices that are expensive
• Deferrals and consolidation can be confusing, so students have to stay aware of their accounts and the choices available to them

There is more information about why banks are interested in student borrowers and how some debt can be helpful in making it through school. Personally, I chose a cheaper school because even small scholarships would allow me to get a degree without taking out any loans. I did make good use of my two credit cards, but I never let my monthly payments fall too far behind either.