Student loans are income, say credit card companies

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 bad credit ok. 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 request more credit. In the rules of good financial management, though, using debt to request more long-term credit does not add up to a way to improve your financial situation.


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