What Should You Use When Scholarships Aren’t Enough?
Most college students cringe at the idea of getting student loans. This is the dreaded side effect of going to college that people try to avoid at all costs. Nevertheless, there may come a time when your scholarships and grants simply do not cover your cost of attendance. You have to find a way to pay for the leftover expenses out of pocket.
If you are trying to find a way to pay off your college debt, you may consider getting a credit card to pay your bills. There are a few advantages to this, but there are a number of concerns you need to keep in mind as well. Here is a comparison of student loans and credit cards to help you decide which option works best for you.
Student Loans vs. Credit Cards
The easiest way to compare student loans and credit cards for college debt is to look at the features that apply to both of them. These include:
Federal student loan interest rates range from 4.66% to 7.21%, depending on the type of loan you get. The average credit card interest rate is 13.02% to 15.57%. You can get a credit card with a 0% interest introductory offer, but that will only give you 12-18 months of no interest payments. If you cannot pay off your debt in that time, you will have an even higher rate to deal with in the end.
The payoff period for federal student loans is 10-25 years, which gives you plenty of time to recover from your college debt. Credit cards do not have set payoff periods. You essentially pay on them until your balance is gone. The amount of time this takes will depend on how much money you pay each month and how high your interest rate is. You could pay off your credit card in less than 10 years, but chances are you will be paying it off much longer than that if you only make your minimum monthly payments.
There are several different options for monthly payments with student loans. Some people choose to pay based on a fixed timeframe, while others pay based on a portion of their income. If you are not making much money now but have the prospect of making a lot in the future, you may consider the income based option. These payments can be as low as $5 a month. If you do not see any fluctuations in your pay rate over time, a fixed payment might be best for you.
With credit cards, you have to pay whatever the minimum amount is for your card. This varies greatly by credit card. Some will charge you a percentage of your current balance, while others will charge a fixed rate plus a percentage of the balance. Most minimum credit card payments are about $15 a month.