Posted on June - 23 - 2011
Students Confused about Financial Aid Overuse Credit Cards
Sallie Mae recently reported that about 35% of college students who used their credit cards to pay for direct educational expenses – such as tuition and textbooks – did so when they did not have to. They had financial aid money available to pay for those educational expenses, but because many students do not have a clear understanding of how their financial aid works they end up racking up unnecessary credit card debts.
Many just said that they found it more convenient and hassle-free to pull out their plastic and charge the purchases, rather than try to figure out if they were eligible financial aid expenses. But educational loans like those processed through Sallie Mae typically carry very attractive and competitive interest rates that are much lower than typical credit card rates.
The current rate on an unsubsidized federal Stafford loan is less than 7%, for example, compared to 20% for the typical student credit card. So students using plastic are losing an average of about 13% on each transaction. That’s why students may want to consider using their student loans to pay for those related eligible college purchases and expenses, so that they can graduate with less credit card debt and more financial freedom.
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