Student credit cards could have serious effect on graduate debt

Responding to a report suggesting that 37% of students rely on credit cards as an additional source of finance, debt management company Gregory Pennington commented that this echoes the growing problem of student debt in the UK.

The report from Halifax building society follows an NUS (National Union of Students) poll suggesting the average student is likely to leave university with debts of £17,500.

A spokesperson for Gregory Pennington said: “It’s worrying that so many students are choosing credit cards as an option for extending their finances, although on the other hand, it has to be accepted that fast-rising costs of living may play a part.

“Credit cards typically should only be used for emergency purchases, or other purchases that can be repaid quickly. Most credit cards carry a high interest rate, so failing to repay on time means those debts grow far more quickly than other forms of credit.

“Students typically only have a very low income, with disposable income often minimal – so the temptation to make purchases on credit cards is probably best avoided. Repaying credit card debts could prove difficult on such a low income, and the high interest means that the debt can grow very quickly.”

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Bankruptcy And Student Loans Do Not Always Go Together

Whenever a person considers filing for personal bankruptcy and student loans make up a good part of their debt, there is a good chance the loans will not be discharged. In 1998, when the governments rules regarding bankruptcy were changed, student loans were ruled to be non-dischargeable as many financial institutions were losing million of dollars.

The reason being that many financial institutions were losing millions of dollars and the government was losing millions as well because the federal government guaranteed many of these student loans.

Today, the person claiming Chapter 7 bankruptcy has to show that an undue financial hardship will result if the loans are not discharged. As in many cases with bankruptcy and student loans make up a large portion of the individuals debt, a portion of the loan may be discharged by the judge, but most of the loan will remain a legal debt.

If the student loans have been sold repeatedly to other lenders with varied interest rates, the exact balance may be hard to determine. In cases such as this, some or all of the entire balance may be discharged.

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Uncovering Secrets to Finding Cheap Textbooks

Student Loan Network Publishes Guide With Tips for Saving up to 90% .

"Financial aid is about more than just helping students find student loans," said Joe Cronin, president and CEO of the Student Loan Network, an Edvisors company. "Anything that is likely to significantly impact what a college student or family will have to spend money on is something we aim to help with as much as possible. Certainly, things like federal student loans and private student loans are important, as are free scholarships such as our Scholarship Points program. But that also includes advice on how to conserve spending money by comparison shopping for college textbooks."

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Cut Student Debt by Doing Good

New laws that promise to forgive some student-loan debt may provide an incentive for more college students and recent graduates to enter public-service positions in professions including nursing, education and law.

Provisions of the College Cost Reduction and Access Act of 2007 and the latest reauthorization of the Higher Education Act, signed by President George W. Bush last month, both aim to lighten the debt load for graduates who enter into a wide range of public-service jobs.

"Loans shouldn't be an excuse not to go into public service," says Robert Shireman, executive director of the Project on Student Debt, a consumer group based in Berkeley, Calif. The new laws are intended to tell students "you can follow your passion and your loans won't destroy you."

People who may be interested should note that there are significant differences between the two programs -- as well as details and financial arrangements still to be resolved.

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