Student Loans vs. Credit Cards

Members of the class of 2016 who borrowed to finance their degrees will leave college with a record level of debt: $37,173 per student on average, according to calculations from student loan expert Mark Kantrowitz. That represents a 6 percent increase from last year, when students left school with an average of $35,051. The calculation is a projection based on federal student-loan data and other factors.

And yet, the fact that U.S. consumers racked up a record-setting $34.4 billion in credit card debt during the second quarter of 2016 also represents serious cause for concern. This was the largest second-quarter debt build-up since at least 1986, when quarterly statistics first were logged and furthermore it also comes on the heels of two equally foreboding financial feats, appearing to solidify a very ominous trend. Last year, we added the most credit card debt to our tab ($71 billion) since 2007. And last quarter marked the smallest Q1 pay-down ($27.5 billion) since 2008.

Which is worse? Credit Card Debt or Student Loan Debt?

So which is worse? It’s hard to say as both situations presents crippling scenarios to overlapping demographics. So, what happens when we look at interest rates for example?

Well student loan rates fluctuate between 4.66% and 7.21% when Direct Plus loans are taken into account while credit card interest rates will vary between 12-20% depending on the card (cashback and student cards tend to have the highest interest rates). The thing about credit cards however is that penalty interest rates can hike up your overall interest to about 7 to 8 point depending on the card and that late fees also add to your overall balance. Student loans on the other hand can offer fees based on percentages which can be even scarier.
Despite there typically being a grace period on delinquent loans before a late fee is assessed, though it varies by lender, Sallie Mae, for example, issues a late fee of 6% of your minimum payment after one late payment that is at least 15 days past your due date. A student loan balance can easily be significantly higher than the average credit card debt in the United States.
Ultimately, these numbers and statistics represent one thing: a problem. Nationwide Student Loan has dealt with situations where no escape seemed possible and yet… solutions were found and debt relief was provided. The biggest problem concerning student loan debt? Lack of information. And Nationwide Student Loan is here to help you with that. All it takes is a phone call. We hope to hear from you soon.