In Memphis and elsewhere, college students are using credit cards to pay for food, clothing and books. Unfortunately, through all of the shopping, students rack up credit card debt that may present financial hardships when the credit card bills begin to mount. This may not only affect college students, it may also affect their parents who co-signed for the credit cards.
Parents may have their own credit scores directly affected when their children begin to miss their credit card payments. To prevent this, parents may consider a few steps to assist their children in their credit card debt. First, parents should consider having a serious conversation with students about how the credit card debt was created; parents may want to examine the credit card bills with the students to discuss their current financial status.
Next, parents may want to assist the students in creating a plan to pay off the credit card debt. Parents may want to establish concrete ideas, such as having the student take on a part-time job to pay off the debt. Lastly, parents may want to discuss the future implications of an accumulation of credit card debt.
While credit cards have many advantages, such as building credit for financial freedom, credit cards may also negatively affect credit scores and become a financial burden for students and their parents. Particularly in a weak economy, students may not immediately find jobs with the kind of income that would allow for paying down steep balances; they may have trouble finding any employment at all, in which case payments may be missed and interest rates skyrocket.
When credit card bills become truly unmanageable and accounts go into collection, families may be faced with difficult decisions. Personal bankruptcy may be an option worth considering when a fresh financial start is needed.
Source: The Street, "The Freshman $1000: How To Help Your College Student With Credit Card Debt," Dec. 26, 2012