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College Students Using Student Loans to Bail Out of Credit Card Debt

MU expert says vicious cycle masks future financial headaches

Sept. 12, 2007

Story Contact:  Jennifer Faddis, 573-882-6217,

COLUMBIA, Mo. — College students are using student loans to bail out of credit card debt, leading to poor real-world money management skills and future financial burdens according to a personal financial planning expert at the University of Missouri-Columbia.

“Students get caught in a vicious cycle,” said Mark Oleson, director of MU's Office for Financial Success. “They max out credit cards with expenses that are often not education-related and then transfer those balances to student loans. The following semester they feel that they are out of credit card debt and start using the credit cards all over again.”

When used in this manner, Oleson says student loans mask the financial problems that college students will have to face upon graduation.

“I would estimate that 90 percent of all college students couldn't even accurately guess how much debt they owe,” Oleson said. “Nobody bats an eye when students graduate with $20,000 in student loan debt, but everyone is concerned if a student has $5,000 in credit card debt. Unfortunately, the world we live in accepts this as normal and it is really a distorted view of debt.”

Oleson advises parents and students to empower themselves by making informed choices. That means looking for information from sources who don't seek to profit from giving advice, such as financial advisors with university extension offices or a place like the Office for Financial Success, part of the Department of Personal Financial Planning in the MU College of Human Environmental Sciences.

Oleson offers the following student tips:

  • Use credit cards to build good credit by using them only for fixed or automatic monthly reoccurring expenses, such as a gym membership.
  • Ask the credit card company to lower the credit limit as low as $200, so the temptation to let debt spiral out of control is curbed.
  • Don't be afraid to ask for financial planning help before problems occur.
  • Get a part-time job, which helps with finances and time management skills.
  • Make sure to seek all scholarship and grant options before automatically turning to student loans.

“Go into the situation with your eyes open and have a plan. Students should know the degree they are seeking, the average starting salary in that field and be able to calculate what kind of student loan debt they can comfortably afford,” Oleson said. “Too many students just think they will worry about it later and because education is a good investment they are just hopeful that everything will work out.”