Your Take 

Your Take: Should Students Get Credit Cards?

Student StudyingOne of the big debates in personal finance is whether a college student should get a credit card. On one side you have people who believe that credit cards are evil, credit cards prey on the financially weak, and credit cards will bleed you dry. On the other side, you have people who believe that credit cards are dangerous but can be a useful financial tool for the financially educated and fiscally prudent.

I personally find myself in the second group and I liken credit cards to fire. Use properly and you can keep yourself warm and cook food. Use it recklessly and you can burn down your house and kill someone.

The problem with credit cards is that it’s so easy to get into debt. You can get your instant gratification without any of the hard work involved and you don’t feel the pain for many many years. This is a recipe for disaster for a student because it’s unreasonable to expect them to use them responsibly in the midst of their greatest taste of freedom.

When I wrote about the best student credit cards and listed some smart tips for college students, I understood the comments I got from people who said credit cards are evil and I was being irresponsible writing a post about them for college students. I wrote it because I think it’s better to educate someone than to shield and protect them.

What do you think? Should students get credit cards? Or should they avoid them like the plague?

(Photo: m00by)


How Students Use Credit Cards

Sallie MaeEach year, Sallie Mae does a national study on how undergraduate college students use credit cards and their usage trends. 2009’s report was released this week with a bang because they discovered that credit card usage has increased to levels never seen before.

Here are some staggering statistics:

  • Students have an average of 4.6 credit cards!
  • 84% of students have at least one credit card.
  • The average (mean) balance is $3,173, the highest ever recorded in the study’s history.
  • The median balance was $1,645 with 21% of students having between $3,000 and $7,000 in debt.
  • 39% of students already have a credit card before they arrive on campus.
  • Median debt of those students was $939, up from $373 in 2004, with only 15% having a $0 balance.
  • Students graduate with an average of $4,100 in credit card debt with almost 20% having more than $7,000 owed on credit cards.
  • A third of students rarely or never discussed credit card use with parents.

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Understanding Your College Savings Options

This is a guest post from MLR @ MyLifeROI. This is a 3 post series and each post is going live this morning on three different blogs: Bargaineering, Green Panda Treehouse, & Poorer Than You. I will be posting a wrap-up post to tie it all together and summarize each article.

You are 22 years old. You have just spent the past four years paying tuition, room and board, books, food, utilities, transportation, etc. The worst part is that it is all getting more and more expensive beyond peoples’ expectations. Where does that leave you? In a mountain of debt upon graduation. For some of us that means letting our debt dictate a less than optimal career.

However, what are some ways that we could better prepare for our college education? And if it is too late for you, how can we better plan for our children’s education?

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Best Student Credit Cards & Tips For Smart Credit Use

Student StudyingDuring a recession, the flow of credit tends to tighten up as banks and lenders take fewer “risks.” The result of this is that people who are credit-worthy but have no credit history, such as students, are caught in the middle. Without a credit history, they can’t get credit cards and loans. With credit cards and loans, they can’t establish a credit history.

An old standby practice, piggybacking, was recently eliminated as the new FICO score rules changed how it treated authorized users. In the past, someone with poor or no credit could “piggyback” as an authorized user on an account of someone with good credit. Many parents put their children on their credit card accounts to help them establish credit, the parents were “co-signing” their child’s debts, so it was perfectly acceptable. Unfortunately, people started abusing this and selling “authorized user positions” on their accounts, some for as much as $500 or $1,000 a piece, so FICO had to respond.

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How to Navigate the College Financial Aid System

Financial Aid Money GrabApplying for financial aid can be an overwhelming and stressful task. There are many steps involved and some of the steps can be rather complex. It is important to remember, however, that the financial aid system has been set up to help you. With a little patience, the system can really pay off in the end. This article will give you an overview of the steps in the financial aid process and will give you a little bit of advice along the way.

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Best Used Cars for College Students

Beater Used CarI never had a car in college and I never really wanted one because our student IDs doubled as free bus passes (the cost was rolled into our student fees). In fact, there were only a handful of occasions where I really wanted a car and those were cases where the bus ride would take an hour and a half (from CMU to Monroeville, which is really just a 20 minute care ride away!). I was fortunate to live in a city where public transportation was pretty good, but what about colleges where the public transportation isn’t as good or where you need a car just to get to class? You need a reliable used car.

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Salary Breakeven for Private vs. Public College Graduates

Bachelor of Arts English DegreeI had lunch today with a few friends and the topic of private versus public college came up, a topic they recommended I put on my blog (so to appease them, I did!). As the graduates of private colleges, we were all curious what the difference in salary between graduating from a private college, paying $30,000+ a year for tuition/room/board/etc, and graduating from a public college, paying $10,000 a year for room, board, etc. The impetus of the conversation was that one friend knew someone who was graduating as a radiation oncologist and did a similar analysis between doctors and typical engineers (his analysis said it took twenty years for the doctor, a radiation oncologist, to “catch up” to an engineer, after accounting for typical raises, college loan debt, and other factors). So what’s the break-even point between private and public college graduates?

The answer …?

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American Opportunity Tax Credit Details

CNNMoney has broken down the details of the latest stimulus package and has the following to say about the American Opportunity Tax Credit, which was a refundable credit pushed heavily by Pennsylvania Representative Chaka Fattah (D):

New temporary college credit: The bill introduces the American Opportunity Tax Credit, which would be in effect for 2009 and 2010. It expands the existing Hope Scholarship tax credit and would be worth as much as $2,500 for higher education expenses, up from $1,800 currently.

The full credit would be available to those making less than $80,000 ($160,000 for joint filers). Those making between those amounts and $90,000 ($180,000 for joint filers) would get a partial credit. And the break would also be partially refundable, meaning lower income families with little or no tax liability could now claim some of the credit. Estimated cost: $13.9 billion.

The stimulus package also has another education related tax break, the Pell Grant has been increased to $5,350 for 2009 and $5,550 for 2010; an increase of $500 in both cases.

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