Yahoo Finance This Houston student paid his college tuition on credit cards — even Caleb Hammer says he’s ‘never seen that’
With a student loan crisis brewing, many young Americans are seeking alternatives.
However, 21-year-old Isaac from Houston, Texas decided the best alternative for him was to use credit cards to finance his studies. He used his Apple card to pay for several semesters, racking up debt that is more expensive than any federal or private student loan program.
Don't miss
Jeff Bezos told his siblings to invest $10K in his startup called Amazon, and now their stake is worth over $1B — 3 ways to get rich without having to gamble on risky public stocks
Car insurance rates have spiked in the US to a stunning $2,150/year — but you can be smarter than that. Here's how you can save yourself as much as $820 annually in minutes (it's 100% free)
These 5 magic money moves will boost you up America's net worth ladder in 2024 — and you can complete each step within minutes. Here's how
“I didn’t know better back then,” he told Caleb Hammer on a recent episode of his YouTube show, Financial Audit. “I've never seen that,” Hammer responds, flabbergasted. “Never even heard of someone doing that.”
As it turns out, Isaac’s lack of financial literacy runs much deeper — but Hammer sees a way out for him.
Complicated family dynamics
As a full-time student, Isaac doesn’t have the cash to pay for his basic essentials. He claims to occasionally deliver food via delivery apps, but hasn’t generated any income from these side gigs over the past month.
Instead, his basic expenses are supported by his father. Hammer calculates that Issac’s dad transferred a total of $600 over the past month. The car he drives for food deliveries is also a hand-me-down from his father. In fact, Issac claims his dad is the reason for his most bizarre financial decision: “The main reason that I put my tuition on my credit card was I thought my dad would help me pay it off,” he told Hammer.
“Sounds like you’re spending money you don’t need to be spending and then he [dad] is bailing you out,” Hammer responds.
On the surface, Issac’s situation seems typical. Nearly half (47%) of Americans claim to financially support their adult children in some way, paying an average of $1,384 for their basic necessities, according to a survey by Savings.com. (Which researchers note is more than twice what they reported putting in their own retirement accounts.) The rising cost of living has compelled many young adults to lean on family for economic support.
However, Issac’s situation isn’t typical. Later in the interview, he reveals to Hammer that he expects his dad to support him financially because he gave him $15,000 of his savings for a down payment on the family home when he was just 18 years old. Issac originally expected some of this money back to help pay for college, but has now given up on recovering it.
Read more: This little-known investment strategy can save you thousands on your taxes
Gifted down payments are fairly common, with 23% of first-time home buyers in 2023 claiming to use a gift from friends or family to finance their purchase, according to the National Association of Realtors (NAR). However, it’s much more common for these gifts to be handed down from parents to children — not the other way around.
Issac’s decision to contribute $15,000 at such a young age may have put him at a financial disadvantage. However, by borrowing on credit cards he expanded this disadvantage further.
Getting back on track
After paying for several semesters of biotech classes with his Apple card, Issac now has an outstanding balance of $14,715. Minimum monthly payments are $548.
The only way out of this situation is for Issac to stop spending and start earning money. Hammer recommends taking a few semesters off and focusing on gig work to maximize income. This should allow him to pay down a considerable amount of debt.
His next step will then be to ensure he doesn’t land in this position again. Fortunately, Issac claims he’s already been approved for a federal student loan. The average interest rate for a Federal undergraduate student loan is 5.5%, according to Education Data Initiative, which means Issac’s studies can be financed much more cheaply when he eventually resumes classes.
What to read next
Car insurance premiums in America are through the roof — and only getting worse. But 5 minutes could have you paying as little as $29/month
Thanks to Jeff Bezos, you can now use $100 to cash in on prime real estate — without the headache of being a landlord. Here's how
'It's not taxed at all': Warren Buffett shares the 'best investment' you can make when battling rising costs — take advantage today
This article provides information only and should not be construed as advice. It is provided without warranty of any kind.
