How to Eliminate Student Credit Card Debt

Pay Off Credit Card Debt From a College Education

Sep 5, 2009

Have you spent too much whilst studying at college? Find out how to clear student credit card debt with the best debt relief program.

A combination of rising living costs and poor personal choices have led to too many young people having unsustainably high student credit card debt. According to a study by Sallie Mae in April 2009, called "How undergraduate students use credit cards", half of all students had four or more charge cards. This is a growing trend as the figure has increased from 32% in 2000.

Clearing Student Credit Card Debt

Seek advice from a non-profit debt counseling service as soon as financial difficulties emerge. An assessment of income and expenditure figures will help someone to identify areas where sufficient savings can be realised to gradually pay-off credit card debt.

Debt Relief Programs

Whilst this will work for up to 40% of clients, others will find that their income-to-debt ratio is unsustainably high. This is likely to mean that a debt relief program, such as a Debt Management Plan or debt settlement program, is necessary to eliminate any unsecured debt accrued whilst at college.

Pay-off Credit Card Debt with a Debt Management Program

This debt relief program involves a budgetary analysis to determine what can be afforded to go towards clearing student credit card debt each month. Instead of making the minimum monthly payment to lots of different providers, a single payment is made to an intermediary. This will then be distributed to creditors and collection agencies on a pro rata basis.

Whilst none of the principal (the total amount owed) is written-off, the majority of creditors will agree to stop imposing further charges and freeze interest payments. An intermediary (provider of the Debt Management Plan) will charge 15% of total contributions for its administration.

A Debt Settlement Program to Eliminate Student Credit Card Debt

A negotiation process takes place with creditors to achieve up to a 50% reduction to the amount owed. The remaining student credit card debt is eliminated over a period of 12 to 36 months. It may be possible to extend the term, although this isn't advisable as it reduces the likelihood of acceptance.

Whilst a charge of 15% of each contribution is acceptable for administering a debt settlement program, do not deal with providers that front-load charges (take them up-front). It is important that all college students ask this question before signing-up.

As student credit card debt is unsecured it is possible to clear it with an appropriate debt relief program. Whilst there are no easy or completely painless solutions, financial difficulties can be alleviated through a combination of improved budgeting and selecting the right debt clearance plan.

Disclaimer: This article in no way attempts to give legal or tax advice. One should consult a licensed attorney, tax advisor, or other qualified professional before proceeding.

The copyright of the article How to Eliminate Student Credit Card Debt in Personal Debt Management is owned by Asa Ghaffar. Permission to republish How to Eliminate Student Credit Card Debt in print or online must be granted by the author in writing.