How To Pay For College

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By The Honorable John C. Ninfo II
As you look ahead to college, a career or the military, it’s important to understand that credit card debt among young people between 18 and 24 years old increased 104 percent from 1992 to 2001. In addition, in the 1990s bankruptcies increased 96 percent among that age group.

Dr. Robert Manning, international expert on consumer credit, recently estimated that between 7 and 10 percent of all college students will drop out of school because of debt problems. And if that were not bad enough, many in that age group who have abused credit cards are being turned down for jobs, apartments, car loans, student loans and admission to graduate school.

Here are some tips to help you resist the temptations of overspending and living above your means with credit cards so that you can avoid becoming one of those statistics:

Understand that there is nothing wrong with having a credit card, but remember that this isn’t new money, more money or free money. Credit cards are a more convenient way (at times) to spend your own money. So have only one credit card that you use for convenience and emergencies, and don’t charge anything on your one card that you can’t pay for when the bill comes in at the end of the month.
Don’t totally buy into the notion that we are a “plastic society.” Use cash, a debit card or a check as much as possible. People who do that spend less. (McDonald’s allowed people to start using credit cards instead of cash; the average sale went from $4.75 to $7.) Definitely use cash for the things that you can eat or drink and for anything that costs under $10.
Avoid store charge cards. Studies show that you will spend more in a store if you have a store charge than if you use even a major credit card. Also, store accounts often charge higher interest rates on unpaid balances than major credit cards.
If you use your credit card, make sure that you always pay your balance in full on time and that you don’t charge more than your credit limit. You could have a $100 balance on your account, pay it one day late, and pay as much as a $39 late charge. You could charge $1 over your credit limit, which the credit card company will often approve, and pay as much as a $39 over limit fee. The credit industry receives over 35 percent of its revenue from these fees, so read your credit card account contract very carefully and be aware of all of those fees and how you can avoid them.
Always have a realistic budget that you update as your circumstances in life change, and then stick to it. When preparing your budget, focus on what you spend your money on and think about whether you “need” those things or simply “want” them because, for example, everyone else has or does them. You should only buy or do what you can afford, and that may not include everything you “want.”
Always have savings, not just for emergencies, but for the things that you know that you’re going to have to pay for in the future, like car repairs when your car is older and out of warranty.
Reasonable mortgage, car, educational or business loans are good debt. Think of credit card debt as bad debt, so if you find yourself with an unpaid balance on your account, don’t charge anything more and start paying the balance down as quickly as possible. That way you won’t be paying as much interest at 18 to 24 percent. It adds up quickly. Never pay less than the interest on your balance for that month so you don’t end up paying interest on interest.
Check out the Credit Abuse Resistance Education (CARE) Web site, www.careprogram.us, for more tips. It will help you to lead a debt-free rather than a debt-filled life.

The Honorable John C. Ninfo II, Chief U.S. Bankruptcy Judge, is founder of Credit Abuse Resistance Education (CARE), a program that was launched on the East Coast and has spread to 23 states. The program’s website is www.careprogram.us.