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Paying for College with Credit

Unless your zany Uncle Louis set up a 529 Plan for you when you were in diapers or your daddy made a killing with his maple syrup soda business (or his law firm, if you come from more traditional stock), you're going to have to borrow money to go to college.

Education is expensive. There's tuition to pay, textbooks to buy, dorm rooms to live in…and, you know, that whole social life thing. It's why up to a quarter of college students end up using a credit card to pay for at least some of their tuition.

Most probably hope that when they graduate, they'll land a cushy job and be able to pay off the plastic. Well, we hate to break it to you, but it's more likely that the Kardashians will decide that they don't want to be famous and move to a quiet Idaho suburb.

Here's the problem: for a moderate-priced school, you might end up paying $21,500 a year for your tuition, books, and other costs. That means you'll need about $100,000 to get into your cap and gown on graduation day. Even if you save up money, work part-time, hit your parents up for some money, and get scholarships, you might be on the hook for about $50,000 of that.

If you try to charge that, your monthly payments will be ridiculous and you'll end up paying over twice as much in interest. Blame the high interest rates on plastic.

Just how bad is the damage? Let's do a side-by-side comparison:

Student loanCredit card
Loan Balance$50,000$50,000
Minimum Payment$50$1,000
Monthly Loan Payment$530$1,000
Number of Payments12076
Cumulative Payments$63,639$75,480
Total Interest Paid$13,639$25,480

Paying in plastic is going to cost $11,841 extra—and you won't get any extra years of education for that extra cost.

What's really going to end up hurting you is that you might not get your dream job out of college. In fact, you may just end up with a Crappy McCrap, VP of Suck position at a company you can't stand. It may just barely pay the bills—and you might not be able to cough up the extra grand a month to pay that credit card. Then what? The credit card company will come after you for non-payment.

With a federal student loan, you don't have to start repaying right away, so you can actually find a job first. You have longer to repay, so your monthly bills are smaller. And if you're still struggling to pay for student loans and pay for groceries, there are systems in place to help you out. Federal student loans can be consolidated, and you might qualify for student loan relief of forgiveness programs. In 2012, the Pay As You Earn program was designed to give Americans a little extra relief from student debt.

You can bet the credit card companies don't use words like "relief" and "forgiveness."

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