Do you know when and how your child is using credit cards? What if your student had racked up thousands of dollars worth of credit card debt-to pay for college!

According to The Baltimore Sun, that’s what has happened to over half of the students attending college in Maryland. When financial aid doesn’t help them fund education costs, some of these students use credit cards to keep up with their college bills!

For public college students in Maryland, the average “unmet need” (financial need that the college doesn’t award to the student) is nearly $7,500. If students can’t pay off these cards right away, they become subject to high interest rates until they can. That could mean a large mountain of debt may meet them upon graduation.

Teaching Your Kids About Credit

Did you know that the average student has 4.25 credit cards, and that 21% of students with cards owe between $3,000 and $7,000? Add in a credit-card sized interest rate, and that debt can become an even bigger burden.

Teaching your kids about credit now will help them make responsible decisions as they start to take on financial independence. A recent post at our student blog, Surviving College Life, tells students what a credit score is, and why they should care about it.

Alternatives to Credit Cards

Rather than using credit cards-which Lauren Asher of the Project on Student Debt equates to “high-risk loans”-students should cover extraneous college costs with federal student loans (I recommend federal loans before private ones), part-time jobs, or work-study.

Though federal student loans are still “debt,” they are a much safer alternative than credit cards. First of all, they have low interest rates. Right now the student loan is fixed set at a maximum 6.8%-a vastly better rate than the wide range of double digit interest rates offered by many credit cards. Secondly, unlike credit cards, student loans do not need to be paid back until after the student graduates.

All the best,
Deborah Fox

Photo: Girl on the Stairs by margarit ralev