Personal Finance for College Students Part I

Personal Finance for College Students Part I – Debt Management

Personal Finance for College Students Part I

Per Trinity Debt Management, the average graduating college student has $4,138 in credit card debt.

It's true that as a college student, you want to build your credit, and there are a few ways to do that, including opening a credit card or taking out a small loan. We'll discuss more about these options in our next blog post. But first, before you go applying for a loan or credit card that requires you take on some form of debt, let's discuss the importance of responsible debt management so you don't get in over your head and become a statistic as described in the opening sentence above.

Make more than the minimum monthly payment. Making only your minimum monthly payments means you'll pay a lot more in the long run. As you'll see by the examples below, paying more than your minimum monthly payment is the way to go.



Scenario 1.  If you paid the monthly minimum payment of $60 dollars with an interest rate of 18%, it will take you about 451 months (37 years) to pay off a $3,000 balance.  In addition, you will have paid about $7,930 in interest charges. 


Scenario 2.  If you paid a fixed payment of $100 (or $40 more than the minimum monthly payment) with the same 18% interest rate, it will take you about 41 months (about 3.5 years) to pay off the $3,000 balance.  And you will only pay $1,015 in interest charges. 


 That’s a $6915 savings by paying just $40 more a month! 


Don't carry more than 30% of your credit.

 In addition to helping you manage your debt, keeping your percentage of debt low on your credit card helps you maintain your credit score. If you accumulate more than 30-50% of your credit limit on a credit card, it can have a negative impact on your credit score.


Make payments on time.

Even if you're someone who eventually makes your payments, if you don't pay them on time, it can have a negative impact on your credit report and ability to obtain new credit in the future. In other words, pay your monthly payments by the date their due.


Having a credit card or loans isn't a bad thing unless you let your debt get out of hand. Use your credit responsibly to support a strong financial foundation for your future. PrimeWay is a Houston based credit union with programs to support college-aged students. To find out more, visit our My Funds page.