Although low credit scores can happen to anyone, knowing the ins and outs of proper credit management and how credit cards and interest rates work can help people stay out of debt. Unfortunately, an abundance of credit card options coupled with an overall lack of financial literacy have been putting good students on the fast track to having bad credit. With student debt at an all-time high, the need for financial literacy has never been more important.
The Rising Cost of a College Education
The average total debt for a four-year college graduate is $24,000, which has risen over 300 percent in the last eight years. However, with the price of a college education rising, so, too, is the average income for college graduates. In fact, a 2007 study found that people with a bachelor’s degree earned over 60 percent more than high school graduates. And if that wasn’t enough, the lifetime earnings gap between high school and college graduates is over $800,000!
Students and Credit Card Debt
As with student loan debt, credit card debt is also at an all-time high for college students, with the average undergrad having a median credit card debt of over $3,000. And if dealing with one credit card wasn’t enough, 50 percent of college students said they own four credit cards or more. A large number of students are applying for credit cards without really knowing how credit works, and in turn they start accumulating credit card debt long before they graduate and are able to find a high-paying job. On average, students between the ages of 18-20 spend nearly 30 percent of their income simply paying off debt. What’s more, 7.2 percent of students cite debt and financial pressure as the two main reasons for dropping out of college.
The Need for Proper Credit Management
With only 45 percent of teens admitting they knew how to properly use a credit card, and only 26 percent saying they have a clear understanding of the basic principles behind interest rates and fees, students aren’t being taught the basic principles of proper credit management. Over 37 million Americans have either federal or private student loans, and with 10 percent of those loans exceeding $54,000, the need for proper credit management has never been greater.
Fortunately, it’s never too late to start effectively paying off debt. Think you might be headed for trouble? Read more about credit management and find out how much you can save by analyzing your own debt today. If you need help, our counselors are always on hand. If not, this means your credit is in order and we couldn’t be happier for you.