03 Jan My college student has $4K in credit card debt. What can we do?

Q. I just learned that my 20-year-old took out two credit cards when school started. He goes to college in another state. And he charged up $4,000 and hasn’t been able to make payments. He doesn’t have a job so I have no idea how he qualified for a card. He had a summer internship only. How could they give him these cards and now what can we do so he doesn’t kill his credit?
— Mom

A. This is rough.

We hear very often about college kids getting credit cards and not being able to handle them.

Most credit card companies do not require a college student to have income in order to obtain a credit card, said Karina Lucid, a bankruptcy attorney with Lucid Law in Bridgewater.

She said credit cards can be obtained based on the amount of money you get for student loans and they can also just be based on your status as a student.

“The assumption is that the student would not apply for or use the credit card if they were not able to pay for it,” she said. “I know that sounds unbelievable, but that is the way that credit issuance works under the circumstances. “

So with regard to the $4,000 balance that your child currently has on the credit cards, the best thing to do is to have them find a way to work it off, Lucid said.

“You may want to help them pay it so that they do not have accrued interest in other things like that but it really is better if they have to deal with it themselves. It’s just a really healthy lesson at this point in their life,” she said.

Of course, you can work out a credit agreement of your own where you help with paying off the credit card debt but then your child owes you the money and has a payment plan with you, she said.

“The bottom line is the credit card company is not liable for your child’s debt even though he is a student,” she said. “He asked for the credit card and he used the funds.”

Lucid said while the $4,000 is very unpleasant, it’s not enough to consider any other kind of debt relief. Debt consolidation programs will not help him, she said. It will just get him into a vicious cycle, forcing him to default on the payments and accumulate interest and fees while they try to negotiate settlements and charge him 10 to 20% for the process, she said.

“He would be unprotected from collections efforts and most likely subject to lawsuits and it just becomes a nightmare,” she said. “So please do not hire a debt consolidation company, nor encourage him to do so.”

And as you may have already guessed, a bankruptcy would be extremely premature as the debt is nowhere near high enough to really justify going into a bankruptcy process, Lucid said.

“But it is a really great opportunity to create a lesson in budgeting and credit usage for your college student,” she said.

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This story was originally published on Jan. 3, 2023.

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