Ask Dr. Don By Don Taylor, Ph.D., CFA • Bankrate.com

In college with a maxed-out credit card

Dear Dr. Don,
I have one, maxed-out credit card that I got when I was a freshman in college. Now the interest rate is as high as 22 percent. My max in the card was $1,000, and now the interest alone has accumulated to about another $1,000, so my total is about $2,000.

I pay my minimum payments, but I really want to get this debt paid off quickly. What is your advice? And if I should get a bank loan, how much should I ask for? I only have a part-time job because I am still in college.
Thanks,
Arti Anthropology

Dear Arti,
You're not alone. A lot of college students have trouble handling credit. It's hard to turn things around when finance charges keep accruing at 22 percent.

I used your numbers and Bankrate's Credit Card Calculator: The true cost of paying the minimum and found out it would take you about six years to pay off the balance if you paid $50 a month. You'd also rack up another $1,600 in interest expense.

If you were able to bump up that payment to $100 a month you'd be free of this debt in just over two years and only pay an additional $515 in interest expense. It's clear that you need to jump-start a loan-repayment program.

It's not likely that you will be able to find a lender to loan you the money to pay off this debt. Pick up a little overtime in your part-time job, or find some other way to bump up your income while you pay down this debt. Make it a priority without neglecting your studies.

If you can't make that work, try talking to your college financial-aid office. They can help you decide if a student loan is feasible for you. Student loan programs aren't designed to help you repay your credit cards, but you can use the loan proceeds to pay college expenses while freeing up cash to pay down your credit card debt.

-- Posted: July 11, 2002