Student debt is something that seems to be talked about a lot at the moment. Since swapping from student grants to loans, there have been lots of concerns about student debt and therefore students and probably more likely parents, could be worried a lot more about student debt than they were before. There are many concerns that have been raised and taking on extra debt, such as a credit card could add to it. It is worth addressing some of these worries though.
Debt will lead to more debt
Many people have concerns that having debt will mean that student just have a lifetime of debt. They feel that if they start the workforce in debt it will normalise debt for them and they will have constant debt through their lives. This is not necessarily the case though. There are many students that are worried about their student debt, want to get it paid off and do not have any other debt. There are also many others who have a mortgage debt, for example but no other type of debt. One debt does not necessarily lead to another.
Credit cards will lead to uncontrolled spending
A credit card is a form of debt which is different to many other types because it is always there. Once you have the card then it is possible to borrow money whenever you need it and there is no pressure to repay more than a minimal amount. There is therefore the opportunity to spend a lot of money using the credit card and then only repay the minimum amount and accumulate a lot of debt or to pay back the card and then spend on it all over again. There will of course be some people that will spend a lot of money on the card and only repay the minimum and build up debt. However, this does not have to be the case and may not be the case for everyone. Each individual is different and they may just use the credit card to give them security when shopping online or to buy things more conveniently.
Debts could get unmanageable
It is worth understanding that student debt will never get unmanageable. The debt is repaid in small instalments which are taken out in the tax code of the graduate and only once they start earning above a specific amount of money. It is designed so that it is affordable and it is even written off after thirty years which means that it may never be fully repaid if earnings are low on average over this time. This means that the only debt that could be unmanageable is the credit card debt. This is something that will be down the individual and some will struggle with it and some will not. It is worth any worried parents talking to their children about good debt management with regards to credit cards and this should help them to understand how to use them wisely.
Students wont afford debt repayments and credit card repayments
It could be a concern for some parents that their children will not be able to afford to repay the student debt and the credit card debt. As explained earlier student loans are repaid in a tax code only when earnings are high enough to cover these costs and so this should not be a problem. Credit cards also have a flexible repayment system. A minimum balance has to be repaid which is usually just the interest and a little extra and so it tends to be manageable by most people. Then it is up to the borrower as to how much of the remaining balance they pay off. It is cheaper if they pay it off sooner, but if they repay small chunks when they can afford it then they should be able to manage both debts easily.
Parents will end up Saddling the bill
There may be parents that are worried that they could end up having to help their children get out of debt after university. This should not be a worry though as the children are responsible for their own debt and it is not up to parents to repay it for them and legally there is no obligation to do it. Obviously some parents feel that they have a need to help out their children financially and so may think that they will need to do this with regards to any credit card debt that they build up. This is up to the parent, but it could be better for them to directly lend or give them money instead of them having a credit card as then the interest on the card will not have to be paid. This will all depend on the parent, the child and their relationship.