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Smart Debt 101 for the Stanford Student

As you move through your Stanford academic career, you may have to make a decision about borrowing any amount to aid you with your student life.  Mind Over Money shares a few tips below as you weigh borrowing decisions: 


  • Not all debt is the same.

  • High-interest, compounding credit card debt is much worse than low-interest student loan debt (assuming it’s not an astronomical amount in student loans taken out thoughtlessly).

  • High-interest credit card debt is dangerous debt because this short-term loan comes due in 30 days (at the end of the billing cycle), and whatever you don’t pay off starts compounding interest immediately.

  • A goal with debt is to plan it (e.g. student loans, car loan, house mortgage). 

  • A great way to avoid unplanned debt is to set up an emergency fund. This is a key financial wellness tool to ensure that unexpected expenses, such as a replacement laptop or towed car doesn’t wind up as an unaffordable expense on a credit card.  See Mind Over Money's budgeting templates to start saving for an emergency fund, if you haven't already! 

  • If an unexpected expense will facilitate your academic progress , like an emergency root canal, a federal student loan is a smarter debt option than paying for it on your credit card because it won’t come due until you graduate, the interest rates are lower than credit card interest rates, and there are options for repayment that can lower what you owe. The Financial Aid Office can help you look into federal student loans.

  • Because family financial situations can change at any instant, you want to make sure to complete the Free Application for Federal Student Aid (FAFSA) every year to be considered for a federal loan if any situation happens to call for it.