Is there such thing as student loan credit cards?

Student loans and credit cards are both financial hurdles that many young adults will have to jump as soon as entering adulthood. They are both forms of credit that can be useful financial tools or sources of deep fiscal debt. While not the same thing, student loans and credit cards do have some areas in common.

Use the FREE credit card finder at the top of the page to compare credit cards to find the best student credit cards!

The federal government is one parallel between college loans and credit cards; the government enacts funding, legislation, and laws to ensure that college students have desirable options for credit at the early stages of adulthood.

A credit card is a good tool to have for emergency costs. However, the trap that many college students fall into with credit cards is the lack of restraint with use; too many college students use credit cards like free money, and they run up high interest debt that will take years to pay off.

College students should have a credit card to use for emergencies and to start to establish a credit history, but they should only have the card if they can use it in a responsible manner. This includes only using the card for emergencies, for buying items that can be paid for and paying off the balance as soon as possible.

Other options for students who will not be able to use credit cards responsibly are debit cards, secured credit cards and prepaid credit cards.

According to CollegeBoard.org, over 62% of college students from four-year institutions have some sort of financial debt related to paying for tuition.

Student loans are a good idea for paying for college because they generally have very reasonable interest rates. At-need students can find government-based student loans below 5% interest, and those loans that are not need-based are generally around 6.8% interest. Other benefits of student loans are that their payments are usually deferred until after graduation, they are government subsidized and their interest is deductible from income taxes.

Private loans are generally higher that government-based loans, but they are another option for students and their families.

The area where student loans become a financial burden is if a student is unable to find a job after college to begin to pay the balance, such as during an economic downturn. Generally, interest rates and fees rise once a student defaults on a student loan.

Generally, credit cards should not be used to pay for tuition. Credit cards usually have a higher interest rate than student loans or other forms of credit to pay for college. Also, the payments on credit card balances must begin immediately. If a payment is late or under the minimum payment, then the interest rates generally jump to very high levels.

However, if a graduate has a good, steady job, and a mastery of the use of credit cards, then a credit card can be used for payment on a student loan with the intent of paying the balance as soon as possible.

Prior to legislation in 2009 under the Credit Card Accountability, Responsibility, and Disclosure Act (CARD), credit card companies often used college campuses as recruiting grounds for young customers- with the blessing of the college or university in exchange for a fee from the credit card companies. However, after the Credit CARD act, credit card companies have much more restrictions on advertising to college students.

The act included the following provisions related to college students and credit cards:

Credit card companies must give reasonable explanations regarding their activities on college and university campuses.A credit card company cannot offer students who are under 21 a credit card without proof of the means to make the payments or a co-signer.Credit card companies cannot offer promotional gifts as an incentive to get students to fill out a credit card application.

Each student will have different needs for a credit card, but general things to look for include low interest rates, few additional fees, and possible rewards programs. Comparing credit cards is an excellent way to find the best deal.

Compare rates, fees, and rewards now with the FREE credit card chaser to research credit cards to find the best credit card!

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Why Paying Student Loans With Credit Cards Is a Bad Idea | Paying

Student loan debt and credit card debt rank as two of the highest forms of consumer debt in the United States. Outstanding debt from student loans surpassed debt from credit cards for the first time ever last year and now stands ready to eclipse the $1 trillion mark. Sometime soon, if borrowing and spending trends continue, debt from education loans and credit cards combined will probably start pushing an unprecedented $2 trillion.

Together, debt from college loans and credit cards is so potentially toxic that it seems outlandish to even suggest any notion of mixing the two. That’s why we were so puzzled to read an article posted by U.S. News & World Report’s Student Loan Ranger that describes two programs by student loan giant Sallie Mae that encourages borrowers to repay their private student loans with credit cards issued by the lender that almost assuredly have far higher interest rates than the loans themselves.

The article, written by Equal Justice Works, a nonprofit organization that helps remove financial barriers for law students and lawyers seeking public service careers, was quick to point out Sallie Mae’s apparent contradiction. On the one hand, the article says, Sallie Mae offers good advice on how to avoid spiraling debt from credit cards. On the other hand, Sallie Mae encourages borrowers to use credit cards by linking them to student loan repayments, which, the article notes, “seems to encourage a vicious cycle of spiraling debt.”

Under the Sallie Mae Cash Back Visa Card program, borrowers can redeem the rewards they earn from using the card to make extra payments on their Sallie Mae private student loans. According to the program’s pricing and terms disclosure, the variable rate on the card ranges from 11.99 percent to 15.99 percent. Of course, like many other credit cards, if a borrower makes a single late payment, goes over the credit limit, or makes a payment that is returned, the APR climbs to 29.99 percent. Like other credit cards, there is also a collection of transaction fees and late fees and over-the-credit limit fees that can pile up if a borrower isn’t careful.

Combine high interest rates with paltry cash-back rewards of between 1 percent and 3 percent and it’s hard to see how amassing credit card debt at higher interest rates than the student loans the card purports to help pay will actually be beneficial.

A second, perhaps even more perplexing Sallie Mae program offers a credit card to parents who cosign private education loans for their college students. The card offers cash-back rewards when parents use it to make student loan payments on behalf of their kids. In other words, parents who cosign a line of credit (the student loan) can get a second line of credit (the credit card) that can be used to pay off the first line of credit at, in all likelihood, a much higher interest rate.

In the end, the article concludes, the Sallie Mae credit card programs are just one example of why borrowers should avoid using credit cards to pay off student loans. Instead, the article recommends that students borrow frugally and wisely and start with federal student loans, which have lower interest rates and offer more borrower protections than private student loans. The article also recommends that students who need help paying their student loans should explore repayment options like Income-Based Repayment and Public Service Loan Forgiveness, which help students pay back education loans without going into further debt.

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