Student loans are income, say credit card companies

Thursday, January 13th, 2011 By

Credit Card

Credit card companies are considering student loan debt "income" to be used to pay back credit. Image: Flickr / MoneyBlogNewz / CC-BY

The Credit Card reform act of 2009 was supposed to fundamentally change how credit card companies worked. Many aspects of the credit card business have changed. For students, however, student loan debt can be considered as income to pay off debts.

Student loans versus credit cards

In June of 2010, student loan debt surpassed credit card debt for the first time ever. Student loans are a form of debt, though they are deferred until the student graduates or leaves school. For the purposes of taxes, loans and most other financial products, student loans are not considered income. For many credit card applications, though, student loans may actually count as “income” to be used to pay back the credit card. This seems to be the case for credit card companies advertising on campuses from Reno, Nevada, to Irving, Texas.

The problem with student credit

Student credit cards were one product specifically targeted by the Credit Card Act of 2009. Credit cards can be a particularly damaging form of short-term credit, because interest and fees for paying late can build up quickly. Credit card companies were accused of targeting students with credit card offers, offering high-limit cards that were essentially unsecured loans with no credit check. Students were often graduating from college with  more credit card debt than student loan debt.

Credit cards for students

Many new credit card regulations try to limit the amount of debt a person can take on. Students can include just about anything as income on a credit card application — including the income of other people who live in their household. There nothing specific in the law that says whether student loans can be considered income to apply for more credit. In the rules of good financial management, though, using debt to apply for more long-term credit does not add up to a way to improve your financial situation.

Sources

Daily Finance
Wright State University Guardian

Previous Article

« New prenatal screening test drastically decreases risks

A new prenatal screening method developed in Hong Kong could reduce the need for risky and invasive testing procedures for pregnant women. Chromosomes
Next Article

Groupon spurns Google; IPO could exceed $15 billion »

Groupon, local business marketing company, spurned Google's $6 billion offer to buy the company. Groupon's IPO could be $15 billion or more. Variation on the Groupon logo.

Other recent posts by bryanh

Financial independence relies on smart spending as much as saving

Knowing how to spend money is the most important factor creating a budget that will help you save enough money to reach your financial goals.
financial literacy

Maryland campaign finance law up for major reform

In a report issued Tuesday, the Maryland Attorney General's committee suggested reforms of campaign finance ranging from major to mundane...
rolled up dollar bill

Sugar prices at 30-year high as supplies deplete

The sugar prices 30-year high can be attributed to volatile weather, increased demand for "real" sugar and additional government regulation.
Sugar Cane