Why Students Pay for College with Credit Cards

CreditCards.com, October 2008

When money gets too tight for tuition, a growing group of students and their families break out the plastic, according to a recent survey. Experts and cardholders seem to agree that credit cards should only be a last-ditch financing tool. However, if you find yourself facing that situation, you do have options to help ease your burden.

According to an August 2008 Sallie Mae/Gallup poll, last year cash-strapped parents charged an average of $5,822 to help pay for their child's higher education; the students themselves charged $2,542. Some blame a shrinking student loan market. Others say they turned to cards at the last minute, when no other options remained. Whatever the reason, the underlying fact is that the problem is real and unlikely to improve anytime soon.

The college crisis

With a faltering economy and rising college costs, more college students and their families are facing a cash crunch. While 8.9 million students filed for federal financial aid in 2008 -- a 16 percent increase over the previous year -- the money isn't always available easily or quickly enough. Making matters worse was the exodus of more than 150 private lenders from the student loan market earlier this year, which decreased aid options and forced some families to scramble for last-minute loans. "This year, people got burned," says Mary McGrath, an executive vice president and certified financial planner with Cozad Asset Management, in Champaign, Ill. "Some people put tuition on a credit card while they were still in the process of getting a new student loan company to take the place of the one they thought they had."

Even when there's not an economic crisis brewing, the money to pay for school isn't always there when you need it. Sid Savara, of Honolulu, intended to work for a few months before starting a master's program in computer science at USC in 2002. But an 11th-hour offer to enroll right away was too good to resist. "I had two choices that day: Either pay with a credit card or lose a semester while I saved up to go to school," Savara recalls. He ultimately chose to charge the entire $10,000 tuition payment, then lived in spartan quarters and worked long hours to pay down his debt. "If I had been able to secure a traditional loan and pay it off over the years, I would have been more comfortable. We had a championship football team, but I had no money or time to enjoy a single game."

[Read the rest of the article at CreditCards.com.]