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Common-Sense Tips for Managing Student Debt

Photo credit: end-credit-card-bet.com Bank loan officer Donnella Hardee says students should not accept special offers from credit card companies.

By Nakia Barriteau
Black College Wire

It starts off with buying those jeans that you like but cannot afford. Then the shoes you have to buy to match the jeans. Don't forget the visit to the salon to complete this look. These are the some of the reasons college students are in debt.

According to the student-loan provider Nellie Mae, the average outstanding balance on undergraduate credit cards in 2005 was $2,169, although credit card debt has decreased 15 percent from 2000.

Joi Brown, a junior at Hampton University, has concluded that college students are in debt because they want more than they can afford. "Their eyes are bigger than their stomachs," she says.

Brown said her own debts are the result of college loans. She said college students should develop a budget to monitor their spending.

"It lets you know where your money is going and it keeps you disciplined," she said.

Brown also said people should follow their instincts when shopping. "If you see something and you are having second thoughts about buying it, more than likely you do not need it."

Patricia Peters, a junior at the University of Central Florida, seconds Brown's advice. She said developing a budget keeps her out of debt.

Peters said she was forced to monitor her spending after her mother told her she would have to pay her own college tuition. Now she says she shops only for items she needs, or window shops.

"Having debt is not cool," Peters said.

In addition to developing a budget, Peters said she saves up for an item before buying it. She said she had accumulated enough to buy a car without having to take out a car loan.

To make sure that her bills are paid on time, Peters said she uses an easy-pay option in which money is taken directly from her checking account.

Peters said she believes her future will be "pretty smooth." "I do not have to worry about owing people or late payments," she said.

A lot of other college students are in debt, however, and for that reason Donnella Hardee, a loan officer at Sandhills Bank in North Myrtle Beach, S.C., said students should not accept special offers from credit card companies.

Students who want to avoid debt should have one credit card with a low interest rate, she said.

"Read the fine print and know what you're signing," Hardee said.

The loan officer said students should charge only what they can afford to pay when the bill comes: "If you cannot afford it, then do not buy it."

Hardee said being in debt can cause depression and ruin an individual's credit score if he or she makes a lot of late payments.

"If your debt ratio is too high and your credit score is low, you can hang it up," Hardee said. "How you pay your bills determines your credit score. It can take up to 15 years to pay off $15,000 worth of debt if a person only makes minimum payments on the account," Hardee said. "It can take at least 36 months to pay off between $3,500 and $3,600."

Hardee said she does not blame students for their debt problems, rather the credit card companies who target them.

Some students do have plans to free themselves from debt after they graduate. Brown, who said she is more than $30,000 in debt, plans to consolidate her loans after graduation. But she said she does not know how soon she will be out of debt. "I do not know because as soon as I graduate it's going to be something else, another bill," Brown said.

She said being in debt has taught her financial responsibility.

"I never took finances seriously until I had to start taking out loans and they started to accumulate," she said.

Hardee said students like Brown who are in debt and want to get out can start by paying off their smallest bills first. Then , she said, people should begin paying off other bills by making minimum payments on those accounts.

"People should remember to keep their debt below 40 percent of their gross income," Hardee said.

Nakia Barriteau is a senior print journalism major at Hampton University.

Posted Feb. 26, 2006