Credit Card Debt vs College Loans
I was recently asked my opinion on what to do with credit card debt vs college debt.
I believe that the 2 types of debt should be looked at completely different.
Credit Cards
With credit cards, you should try and pay them down as much as possible while in school. If your monthly payment is $45, try and send at least $75, get your balance down to where the monthly payment is only about $15, do NOT completely pay off of your card, that can actually hurt your credit. Try to keep something charged on your card but always pay it on time if not early. The average credit card rate is 14% or more!
College debt is a double edged sword, some is good and some is an evil necessity.
Subsidized Loans
Government backed loans are the best ones, do not even try to pay them off while still in school, but try to budget for the payment by saving some money every month and putting it into some kind of SAFE investment, then when you do graduate and it is time to start paying off these loans. Start putting what you were saving (while in college) as your monthly payment and also try to put 1/2 of the interest from what money you were able to save toward your loan. It may only be $1 or $2 per month. But since you are only using 1/2 of your accrued interest you are still getting some compound interest that will eventually let you pay more per month toward your loan. In reality this technique will help boost your credit score and pay off your loan sooner, rather than later.
Private Loans
The other type of college loans is private loans. These can be some of the worst loans you can get. They will have higher interest rates. Try to start putting SOMETHING toward these loans everytime you can, even while in college.
I personally think that a college student should try to save as much as possible during college so that they do not have it so hard when they graduate.
My Loans
I personally have government loans and credit card debt (3 cards)
2 of my credit cards have under $200 on them combined just to keep the credit line open and to establish credit. My other card I use for gas every month because I get 5% off gas. My monthly payment for that card is about $95, but I pay at least $200 every month, just to get it down and help boost my credit rating.
My government loans are subsidized, which means as long as I am in college, Uncle Sam pays the interest on these loans for me. I am paying the rest of my tuition with cash that I make from doing little things here and there. I still have a social life, I still take friends out to dinner, go play pool with them, go on vacations at least every 2 months, and go to the bar every now and then to socialize. I am a typical college student in some aspects, but I am also looking toward the future.
Update.
ps. I just received my dividends from my savings account, that amount will be reflected in April's Results. Which aren't looking to good due to low stock prices and a deliquent personal loan through Prosper.
