A growing number of college graduates are finding themselves in credit card debt, and a recent study released by TrueCredit.com stated that one in four students graduate $5,000 in the red.

FUTURE PROBLEMS   
    Students have trouble managing their debt, which could lead to civil judgments, collection activity and low credit scores, said Angie Reed, marketing and business development manager at the K-State Federal Credit Union.
    This could lead to problems getting a mortgage or a loan in the future.
    “Lenders look at debt-to-income ratio,” said David Evans, professor of family studies and human services.
    Evans said lenders also look at a borrower’s potential debt to see if they are an “OK risk” when it comes to offering them loans. A person with a potential debt of $1,000 looks much better than a graduate who is already $5,000 in debt.

HOW IT BEGINS
    For many students, the problem begins because they do not understand what they are getting into when they sign up for a credit card. They can be lured in with special introductory rates or the promise of a low annual fee that isn’t going to change.
    However, companies can raise the rate slowly, leading to small monthly payments from their customers.
    The small monthly payments could turn into larger payments depending on what the credit card is used for and the agreements made. Late or missed payments cause the interest rates to go up, and companies issue penalties, making it harder to pay the bill. This leads credit users further into debt, damaging their credit scores if they are taking on too much debt with a low income, Evans said.

PETER AND PAUL
    Students and graduates who find themselves in an overwhelming amount of debt might take drastic measures to try to get themselves out of this debt.
    They could defer payments on to another credit card so they might pay at a later date, or they often use their student loans to pay off the debts. This is referred to as “robbing Peter to pay Paul.”
    Evans said that the recent poll stating one in four students graduate with $5,000 dollars in debt could be wrong because of the debt hidden by this practice.

GETTING HELP
    There are several ways to help students deal with this alarming problem. They can go to a credit union or a credit counseling agency to seek options for getting out of debt and get help developing a budget with a goal of being debt free.
    “The only way to keep our members out of debt is to ‘shoot straight’ with them,” Reed said. “That means that we look at their situation and let them know if they can afford things.”
    The K-State Credit Union and other institutions try to prevent debt but do offer services for those in debt.
    K-State leaders are working to set up a financial assistance center for students. Evans, who is giving leadership to its development, said it’s still in the preliminary phases, but the center will give students free financial advice on debt or investments.

PREVENTION METHODS
    For students who are looking to prevent debt, Kipp Lee, a certified counselor from Housing and Credit Counseling Inc. in Manhattan, has the following suggestions for students to help stay out of debt: make and use a budget; use credit cards for emergencies, travel preparations or Internet purchases; do not use them for basic living expenses; do not use student loans to pay off debt.
    Students need to know what they can and can’t afford. To avoid getting into debt, they should get out of the cycle of using credit cards. Evans advises students to freeze their credit cards — literally.
    He said students should put the card in a water-filled plastic bag and place it in the freezer and you won’t easily be attempted to wait for the ice to thaw and rack up more debt.
    Evans said there is not a smart way to use credit.
    “Wise ways to use credit cards — not,” he said.