How Students Deal With Student Loan Debt
College students have an unfair advantage when it comes to debt. A student can encounter debt from generational impulse buying. Parents can have poor buying habits and poor habits can be linked to family behavioral problems. Parents who overly exceed their financial resources will produce children who will overspend as well. Some households do not know how to budget. Budgeting must be taught early in a child’s life or shortfalls will cause future adult problems. Parents should teach their children financial awareness so they can make rational spending decisions. Some students think having a lot of material possessions will establish their identity. Especially, in a college setting, students will face factors that will increase the urge to buy on credit because they want to feel a part of the college culture.
Most full-time students experience an interest in buying power. Some students buy clothing, beauty, and socializing things on credit. Buying when it is not necessary is defined as uncontrolled behavior. When a student has the urge to buy under the impulse it can cause future financial problems. Impulse buying is what gets the most student into long term debt. Most students are emotionally attached to compulsive buying. Purchasing goods in the present changes the mood of students (Brougham, Jacobs-Lawson, Hersey & Trujillo, 2011). Emotional students buy under the impulse to try and improve their negative state of mind by spending money without thinking about future consequences.
Students will spend numerous dollars on credit at the expense of their own education. Freshman students usually have one credit card (Mansfield & Pinto, 2007). Credit card companies target college students to apply for credit. Credit card companies see students as an easy target for profit. Students are vulnerable when it comes to credit card offers on campus. Credit card companies use promotion tactics to get college students attention. Some credit card companies use free pens, t-shirts, coolers or some other persuasions to get students to apply for credit cards (Yoselyn, 2003). Companies see college students as an easy target because students are vulnerable when it comes to credit card debt. Although it is legal for students to have credit at a young age, the cost of paying off a large interest rate seems to take a lifetime.
Sallie Mae, a government service company, has its investors best interest at heart versus the interest of low-income students. A private lender such as Sallie Mae profit from irresponsible student spending. Sallie Mae has a high percentage of returns due to student lending. Full-time students and low-income borrowers are singled out by Sallie Mae’s lenders. “Private lenders do not have flexible repayment options and no forgiveness programs for students. From missing one payment students can be declared in default in payment. Even those who make some payments face serious damage to their credit” (The Sallie Mae Saga). A student who fails to repay on their loan have to face hostile collection methods. Since many full-time college students face harassing phone calls from private loan companies, these students become emotionally stressed. While student debt is steadily increasing, see the chart below on how Sallie Mae is making millions of dollars in profit off of student loan debt.
