Friday

Credit Card Debt vs. Student Loan Debt: Which Should take Precedence?

Guest Post by Mariana Ashley

With Labor Day now done and long over with, all colleges have officially commenced. That said, there are many students who will be completing their final semester/year of college. While many are looking forward to earning their diploma, many are dreading what happens shortly after graduation—repaying student loans. But the situation may seem a lot worse for graduates who have to face a double whammy: student loan and credit card debt. If you find yourself in this situation, which debt should you try to take care of first and why? To find out, continue reading below.

What Kind of Debt Gets Higher Priority?

To state it rather directly, you should always aim to clear your credit card debt before your student loan debt. This is because since your credit card is considered revolving debt as opposed to installment debt, it will impact your credit score more ferociously and more quickly than a student loan debt. That's not to say that your student loans should be disregarded. But if you have some sort of student loan grace period—which is typically around 6 months or so after graduation—you should put all of your energy to wiping out your credit card debt first before making payments to your loan. It's understandable why you may want to pay off your student loan first during the grace period, after all you typically do not acquire any interest during this time. But ultimately credit card debt will do more damage. If you find an extremely high-paying salary job and can afford to pay off both credit card and student loans simultaneously then by all means do it. But if your resources are limited, go with the credit card debt first. If your student loan grace period expires and you still have a hefty credit card balance, talk with a student loan officer immediately to figure out a way to make the smallest monthly payments possible. Sometimes doing something as simple as consolidating all of your loans can result in a small monthly payment, some as low as $50. Whatever you do, you never want your loan to get defaulted though.

Debt Collection Rights

If for some reason you cannot make timely payments on either your credit card debt or student loan debt, you can be reported to a credit card debt collection agency or the Department of Education debt collection agency respectively. By law, debt collectors (of either department) can't threaten to repossess your home, car, or anything else valuable over the phone to compensate for your debt. But they can drag you to court and sue you. Here, if a judge finds you at fault then the judge can mandate that certain items be repossessed, garnish your wages, or collect your tax refund checks to pay off your debt if you don't the money to pay it off for example. Note that credit card and student loan debt collections work a little differently however. With credit card debt, each state has a statue of limitations—which simply means there is only an allotted time for which a debt collector can hit you with a law suit. For example, in Texas it's 4 years. A debt collector can still take you to court even after the statue of limitations is up—it's up to you to show proof that the allotted time has expired if you are taken to court. While you may get out of making the court forcing you to pay up, know that your credit report will be ruined for a good chunk of your life. Good credit is needed to make most big purchases that you will make as an adult, including a home and car. A student loan debt collector does not have any restrictions however and can sue you at any time.

Author Bio:
Mariana Ashley is a freelance writer who particularly enjoys writing about online colleges. She loves receiving reader feedback, which can be directed to mariana.ashley031 @gmail.com.

10 comments:

Tim said...

I agree credit card debt should be the first to be paid off. The biggest thing when it comes to credit card debt is the fact you don't spend it as fast as your paying it down. The best way to deal with them is to use management systems to keep a close eye on your month statements. Where student loan you have you less temptations.

Steve Cooper said...

Its good things, keep share

federal student loans

SA Perillo said...

I'm planning a three month travel trip and am trying to decide if I should get credit cards with preset spending limits to keep me on my budget. Does anyone have any advice on this?

Payday Loans said...

In my opinion too, credit card debt should be paid off first and then consideration should be paid to student loan.Credit card debt is really creating a horrible bubble which is about to burst if care will not be taken..

payday loans no credit check said...

I think credit card debt should take precedence otherwise an additional debt can be invited to ones life. Your post is focussing on a relevant matter.

Pay Day Loan said...

An student loan is a very common motivation idiom in La learners because learners loans are part of the general actual to knowledge. It's easy to continue to learn even if you don' t have the required financial options at your convenience. The next step everyone tendencies you to take is utilize for knowledge mortgage. Government loans have a certain limit, if you need more, you may still utilize for knowledge mortgage, but a private one.

robert hess said...

I need more articles and blogs please post soon.
unsecured loans online

jerry john said...

With Labor Day now done and long over with, all colleges have officially commenced. That said, there are many students who will be completing their final semester/year of college. While many are looking forward to earning their diploma, many are dreading what happens shortly after graduation—repaying student loansloan

Anonymous said...

A loan refinance is a completely new loan that pays off your initial mortgage and allows you to refinance with either a different lender or with the same lender with better terms. A loan modification implements changes in your existing mortgage to allow you to avoid foreclosure and/or have a change in terms and rates to lower your monthly payments. quick payday loans

Anonymous said...

A loan refinance is a completely new loan that pays off your initial mortgage and allows you to refinance with either a different lender or with the same lender with better terms. A loan modification implements changes in your existing mortgage to allow you to avoid foreclosure and/or have a change in terms and rates to lower your monthly payments. quick payday loans

Copyright

The documents distributed here have been presented on this blog in good faith. All Flckr.com photos are presented here via Flckr's "blog this" feature. This feature is enabled by each artist on Flckr. If you find material here that belongs to you and you would like to have it removed or credited please contact me and I will gladly follow your wishes.

Copyright and all rights therein are maintained by the authors or by other copyright holders. It is understood that all persons copying this information will adhere to the terms and constraints invoked by each author's copyright. These works may not be reposted without the explicit permission of the copyright holder.