Mellody Hobson Answers Your Student Loan Questions

How do you handle student loans and credit card debt?

ByABC News via logo
April 26, 2010, 1:02 PM

April 27, 2010— -- It's a common problem facing many students and recent graduates -- the weighty combination of student loans and credit card debt.

Mellody Hobson, "GMA" financial contributor, traveled to San Francisco to tackle these tough questions and to school students in the ways of financial life after college.

Is it Too Early to Start Investing in Stocks?

It is never too early, especially if you have a little extra money at the end of every month, Hobson said. She recommended investing in a mutual fund.

"Even if you could put away $25 a month or $50 a month in a mutual fund, that would be a really terrific thing and there are a lot of mutual funds out there that will let you invest for very little money," Hobson said.

What is the Best Way out of Credit Card Debt?

It is easy for students to accumulate credit card debt because they start to use credit cards to extend their lifestyle, Hobson said.

"The problem is that balance really does cost them over the long term, in terms of the interest that they pay. So, for every item that they buy, for every pizza that they pay for, they end up spending a lot more money than they end up spending," Hobson said.

In certain cases Hobson recommended working out a payment plan with the collections agency, and once you pay everything off make sure you get a letter from them stating you no longer have a balance.

"If you get into trouble with credit card debt…make sure that you get proof of payment in writing…you might need that for proof for everything from buying a cell phone to getting a job," Hobson said.

Hobson said building a credit history in college can be a good idea, but she recommends parents make their children authorized users on their credit cards so they can keep track of the spending.

If that is not possible, then students should only have one credit card, not multiple cards, Hobson said.