Higher education has never been an easy or cheap matter. The cost of attending a college has always been rather high for many families and it keeps inflating year by year.

According to the National Center for Education Statistics, the average attendance cost of a four-year college (full-time) has gone from $10,231/year in 1980 to $28,775 in 2020. This is a whopping increase of 180%, and it seems like education tuition and fees don’t seem to stop growing anytime soon.

Needless to say, apart from high tuition, students have to take care of a wealth of other expenses. They have to cover their books, accommodation, food, and personal expenses. On top of that, they might need to spend money on additional services and goods, such as Write My Essays services or tutors, to make sure they get through their degrees successfully.

Not unexpectedly, all these expenses make attending a college out of reach for many young people. And they turn to student loans and credit cards for help.

Is this a good idea, and which solution is better? Read on to learn everything before borrowing!

What Is a Student Loan vs. a Credit Card?

A student loan is a closed-end loan designed to help consumers fund their education. This kind of loan can originate from either the federal government or private lenders. The total amount of the loan you can get is typically determined by the estimated cost of your college attendance minus the total sum of any scholarships or grants you receive. Once your loan is approved, you won’t get this money physically. Instead, it will be typically paid semester-based and forwarded directly to your college or university to cover tuition, fees, books, and living expenses, while you will only receive leftovers (if any).

The benefit: Compared to other loan types, you typically don’t have to start paying back your student loans while you’re in college and within the grace period of 6 months after graduation. Still, it’s important to note that interest and fees start applying instantly, enlarging the sum of the debt.

A credit card, on the contrary, is a physical card provided to you by your financial institution. This card comes with a fixed credit limit that you can use to make purchases online and offline, pay bills, or withdraw cash. Typically, the limit is determined based on your past credit history and total score. Since many students don’t have scores yet, they are often given small initial limits of under $1,000 until they create a positive score by using their limit and paying it back timely.

The benefit: Unlike a student loan, which is only meant to finance your education, a credit card can be used fully at your discretion as long as you pay your debt off.

Top Pros and Cons of Student Loans

Student loans are a rather popular solution for students who can’t afford their education. However, before you opt for them, there are a few points you should consider.

Pros:

• Loans can make cost-prohibitive education within your reach. Since the sum of the loan is calculated based on the expected cost of attendance, a loan enables you to apply to literally any school of your choice.
• Student loans are more accessible than credit cards. Students with limited or no credit history at all can find it hard to receive a credit card, whereas taking out a loan doesn’t require a credit history check.
• Student loans typically have lower interest rates compared to other funding options. In 2023-2024, the interest rates for direct loans ranged between 5.50% and 8.05%.

Cons:

• Loans may not cover the total college attendance cost. Both federal and private lenders may have certain annual limits on how much money you can receive.
• Students who take out loans typically graduate with dozens of thousands of dollars in debt, which can become financially challenging and make them postpone other financial goals for later.

Top Pros and Cons of Credit Cards

Unlike loans, credit cards are less frequently selected by students as their primary way to cover the cost of college attendance. Yet, many young people choose to open cards to cover their daily needs. And there are also a few perks and downsides to know about.

Pros:

• Unlike loans, credit card debts need to be paid out faster since the average grace time is just between 21 and 25 days. This fact can encourage students to set up small but regular payments to manage their debt and help them learn financial literacy and build helpful skills along the way.
• By using a credit limit and paying it back on time, young adults can build a good credit history while still in college. This can be of help in the future when you decide to make a big purchase, such as a car or a house.
• Last but not least, we have to mention that banks usually offer a wealth of student-centric perks that can come in handy. These include student discounts, rewards, cashback, no annual fees, etc.

Cons:

• Credit cards given to students sometimes are more accessible than other types of cards. Yet, they might still require a credit history check, and if yours isn’t good enough, you might end up with a very low credit limit.
• Loans that are transferred directly to your school eliminate the possibility of overspending. However, a credit card gives you too much freedom in the ways you can spend your money, and it can lead to unnecessary spending.
• Interest rates for credit cards are also significantly higher compared to student loans. In 2024, the average interest rate is as high as 24.74%.

The Bottom Line

In today’s high-priced world, living your life without any debt is nearly impossible, especially when you’re a young adult aiming to receive a high-quality education. Luckily, there are quite a few ways to fund your studies, even if it’s out of your reach. Some of the most popular financial solutions students use are credit cards and student loans.

So which one is the best option?

Obviously, both a loan and a credit card get you into debt, which isn’t good. However, as long as you master financial literacy and debt management, you can pull it through and gain a wealth of benefits.

In the end, there is no one-size-fits-all answer. Student loans and credit cards both have pros and cons. While credit cards give you more freedom, they tend to have higher interest rates. And while student loans potentially give you a chance to pick any school, they may not always cover the entire cost of your attendance.

Hopefully, this article helps you see the difference and define which option is right for you!