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Why Aren’t High School and College Students Smarter About Credit?

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Why Aren’t High School and College Students Smarter About Credit?

It is a delicate balancing act for parents to teach their high school and college students about the wise use of credit. Parents may be swamped themselves with a mortgage, car payments, or everyday expenses, and some may still be paying off student loans from their college days. The prospect of sending a child to college while saving money for retirement or caring for elderly parents can be frightening. Yet most parents still want to give their children the benefits of a college education, without breaking the family piggy bank.

A few years ago college students had easier access to credit, but the Credit CARD Act of 2009 put a damper on that. It restricted card use by students without an adult co-signer and reduced promotional card offers on college campuses. In response, more families started using debit cards to help students control college expenditures.

In spite of the reduced campus credit card usage, some students still run up both credit card and student loan debt while in college. According to, the average college student who uses credit has at least one or two cards. They charge about $150 a month – sometimes for recurring payments, sometimes for emergencies, and sometimes for everyday purchases. In addition, some students use credit to cover about $2000 in college expenses. This puts them in the difficult position during the college years of trying to pay off high-rate credit cards. Upon graduation they have even less money available when student loan payment due notices start arriving. Here are some ways to make your high school or college student smarter about the use of credit:

  Learn more about financial aid: The best way to reduce credit use is to reduce out-of-pocket costs in the first place, and the best way to do this is to maximize financial aid. This relies on grants and scholarships, the federal work-study program, and lower-cost federal student loans to help pay college expenses. It may be difficult understanding how to file the FAFSA, but using more financial aid reduces the need to borrow from other sources.

  Start budgeting earlier: Most parents simply pay their students’ high school costs without giving a second thought to it. But you need to involve your student in the process as early as possible so he or she gains a better understanding of cost and consequence at a much earlier age. It will then be easier to make the transition to talking about a strict college budget.

  Talk about money more: Most parents have a hard time talking to each other about money, let alone talking to their child. It is crucial to get over this discomfort so your student has a more realistic financial picture of the world.

Why aren’t students smarter about credit? Because nobody taught them any better. Make sure your student doesn’t fall on the wrong side of the credit statistics.

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