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Debate of the Day: Do You Send Your Kids To College With Credit Cards or Student Loans

Written by sergeiavatar

Sergei do not have baby seals in college but Sergei was once younger pup, who went to college and Sergei is still paying student loan bills like most other students. Sergei remember how great it was to get student loan payment at beginning of semester and then spend money on food and living expenses. Problem is that private student loans offer high interest rates that rival credit card interest rates at times and, because student can’t get rewards for spending loan money like spending on credit cards, the question is whether better to take out more student loans or spend on credit card.

JPMorgan and Sallie Mae both offer private student loans with interest rates around 9-11%. Student takes out private loan for college and spends money and after they graduate and grace period up, they get hit with principal and interest payment that can’t afford and that have to pay forever. If same student took out rewards credit card like Discover More card or Citi ThankYou card, they still have money for living expenses but could pay bill off every month and avoid interest, instead of paying inflated amount after school. Even if can’t pay card off completely every month, student still receiving rewards on purchases, to use on other purchases and life’s necessities.

Problem with both credit card and student loans is that irresponsible or less knowledgable student could get in trouble with credit if overspend on credit card without job to pay back bill monthly, or trouble with student loans if spend too quickly or take too much loan.

Another perk with credit card instead of student loan is that job market is poor and if student come out of college and get no job or job that not pay much, they not able to pay student loan bill. But, if student paying bill on credit card each month, then don’t have big bill to pay after school like if took student loan.

You stop scratching head and feeling like confused pelican, because there no right answer here. The question whether credit card is better than student loan for college student depends on the student and family situation. What is true is that credit cards offer rewards and good payment history will raise credit score, whereas student loan has no rewards and good payment history may not matter in light of fact that takes decades sometimes to pay off balance.