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Helping students avoid high levels of credit card debt

When teenagers head to college, they will face a wide range of choices that are bound to be new to them. Many will stumble in their first few years away from home, and most California parents understand that college is a relatively safe place for their kids to explore the world and begin making important decisions on their own behalf.

Students will learn that all choices have repercussions, and that some of the consequences of our actions are more severe than others, and longer lasting, as well. Credit card debt is one example of a problem that can have lasting effects on the financial well-being of students.

Sending a child off to college armed with one or more credit cards is not always a bad idea. Responsible use of credit can help young people understand budgeting, interest rates and the importance of paying bills on time. However, if a student misuses his or her available credit, or applies for new lines of credit that the parents are unaware of, the situation can quickly escalate.

The best approach to credit card debt is to sit down with your child and go over the numbers. Being well-informed about the full extent of the financial damage can help all parties decide on a plan of attack. In some cases, the child can pick up a part-time job and aggressively pay down the debt. For students who are already carrying high course loads or struggling with their existing schoolwork, this option may not be the best choice.

California parents can always opt to pay off the debt themselves, and have their child pay them back over time. In some cases, however, the parents are also facing high levels of debt, and taking on a new expenditure is not financially feasible. There are situations in which the best available option is a personal bankruptcy filing on behalf of the student borrower.

While such a move will negatively impact their credit rating, it will also provide for the discharge of the majority of the existing credit card debt. Students can then have the chance to rebuild their financial stability from scratch, before they need to focus on buying a home or starting a family.

Source: The Street, "The Freshman $1000: How To Help Your College Student With Credit Card Debt," Dec. 26, 2012

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