Should You Bail Your College Kid Out of Credit Card Debt?
A reader named Millie wrote in with a story I bet more of you are living than you’d admit out loud: her college daughter racked up over $2,500 in credit card debt, hid it until the collection calls started, and now Millie’s wondering if she should step in and fix it. My answer might not be the one she was hoping for. If you’ve got a kid with a credit card, or you’re about to hand one over, you’ll want to read this.
Ever gotten a call from a collections agency about debt you didn’t even know your kid had? That’s exactly how one mom found out her daughter was in over her head. And “in over her head” was putting it mildly.
Here’s her letter, lightly trimmed:
Dear Mary: My daughter, who’s in college, got a credit card and now she’s in over her head. She works part-time for a small paycheck, and between the interest and the late fees, her balance is over $2,500. I’ll have to step in and handle this. How do I negotiate with the credit card company to settle for less? She kept quiet about missing payments until we started getting collection calls.
โ Millie
Dear Millie: First, the practical part. The credit card company almost certainly won’t talk to you. You’re not on the account. If your daughter wants to add you, that’s an option, and the company might even welcome it. They’ve probably had their fill of chasing her down.
Now here’s the part you didn’t ask about, but need to hear.
How your daughter got here
Card issuers can’t legally hand a credit card to anyone under 21 without proof of income or a cosigner. That’s been federal law since 2010. But “proof of income” is a laughably low bar. A part-time paycheck clears it and the marketing floodgates open the day a kid turns 18. A new survey of 1,200 college students backs this up in a way that made me put down my coffee: 89% now carry a credit card balance, up from 42% just three years ago. Food, rent, and “I didn’t have enough in checking” are the top reasons why. Only 20% could tell you what a credit score even measures.
Reckless doesn’t quite cover it. These are kids getting handed grown-up financial tools with zero instructions, at exactly the age when marketers are circling hardest.
Why I’m telling you not to bail her out
May I offer some advice you didn’t ask for? Don’t bail her out. Not even if you can easily afford it.
Unless your daughter feels the actual weight of what she owes, she won’t learn a thing from it. I’ve been doing this a long time, and I can tell you the pattern: rescue a kid from credit card debt once, and it’s almost never a one-time thing. It becomes the plan.
The one question to ask yourself first
Before you reach for your checkbook, ask yourself the one question that matters: can I actually afford it? Not “can I scrape it together.” Afford it as in, my own retirement is funded, my Contingency Fund is intact, and this wouldn’t set me back a step.
If the answer’s no, that’s the end of the conversation. Social Security isn’t going to stretch the way it did for your parents, and nobody else is coming to fund your retirement for you. Your daughter has decades to recover from a $2,500 mistake. You have a lot fewer to recover from raiding your own future to fix it.
What to do instead of writing a check
1. Stay off the account.
Let her call the issuer herself and work out a payment plan or hardship program. That call is part of the lesson.
2. Point her to NFCC.org.
The National Foundation for Credit Counseling has been matching people with certified, nonprofit credit counselors since 1951. Think of it as a personal trainer for her finances… someone in her corner who isn’t you, and isn’t a debt-settlement company charging her to make it “disappear.”
3. Let the consequences land.
That might mean picking up more work hours, or even a semester off. If she’s serious about school, she’ll find her way back to it.
4. Show up emotionally, not financially.
She needs a soft place to land, not a rescue.
5. Have the bigger conversation once the dust settles.
Not about this one card, but about how money actually works. That’s the conversation that sticks.
One more thing
Watching your daughter dig herself out of this on her own is going to teach her more about money than anything you or I could say. That’s not a consolation prize. That’s the whole point.
If this hits close to home, my book Raising Financially Confident Kids digs into exactly this: how easy credit and a culture that’s chummy with debt set kids up to fail, and what you can do at every age to change that before the collection calls start.
And if your daughter’s willing to read anything right now, hand her The Financially Confident Woman. Being in debt isn’t a money problem… it’s an attitude problem, and that’s a truer thing to hand a 20-year-old than a spreadsheet.
Question: Would you bail your kid out of credit card debt, or make them dig their own way out? Share your thoughts in the comments below.
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Having lived through the Great Depression and WWll, my parents had one theory about debt; “Pay your own freight!” I put myself through college with working, saving and missing a year or two. I didn’t have a credit card until I was wwwaaayyy over 21 and Out of my parents’ home!! These days I have One card and pay it off Every Month! I realize that others may have different circumstances. But we All need to grow up!!
Nope, do NOT bail her out. She made a decision as an adult and now she will have to find the solution as an adult. $2,500 is not an impossible sum. Drop out of school for a semester and work like a maniac and pay it off, Lesson learned.
Mary
You didn’t mention the effect on siblings. Will the help for one child make it more difficult for parents to help a younger child(ren) with their education to the same degree? I’m an only child so this wasn’t an issue, but if I had a $ for every time a friend or colleague has told me about how they’re struggling but doing it on their own dime while parents ‘reward’ their feckless sibs or the child who provided the first grandchild or grandson, I’d be a rich woman now. On top of giving one child thousands or tens of thousands, at the end of the day parents tend to divide their estate equally among their children. If you want to start a family feud among your kids, just keep helping out the child who won’t manage at the expense of your other children. This of course doesn’t apply if your child, their spouse or your grandchild has expensive medical or special needs that aren’t covered by insurance. But even then, you need to make sure that everyone knows why you’re helping one child and you better be prepared to help another child to the same degree if their situation changes.
We learned this lesson the hard way 20 yrs ago when one of our children used a credit card we’d given her for school supplies and books to make a down payment on a car! Needless to say, we took that credit card away from her and set up a repayment plan for her to return the money. When my next child was going to college, we got him a USAA College card. It had a low ceiling of $300 his freshman year, $400 his 2nd year, etc. It was just enough to buy books and have on hand for car emergencies since he commuted. I don’t know if these types of credit cards exist anymore, but it was a great way to teach kids about credit cards. I totally agree with Mary’s advice on this one.
I needed that advice today. I have put thousands of dollars into bailing out my oldest daughter and yet they keep going deeper and deeper in debt. I feel guilty if I don’t want to help her, but I’m 70 years old and I need to think about how much money I’m going to need in the years ahead. She is 40 years old and it’s probably time she figured it all out.
Stop helping her. She’ll learn to manage her money and spend wisely when she knows she can’t depend on you. My son has been married for 20 years but it’s only been the last 5 years that we cut him off entirely. He has 3 kids, and I love them dearly, BUT, they are his responsibility, nor mine:)
Loved your answer, only the retirement paragraphs seemed to contradict the rest of what you were saying. Regardless of how wealthy the parents are, I think it’s much more likely that bailing out the child (and that’s what she’s behaving like, regardless of her years) will hurt the chid more than it will help her. She needs to learn. I’m speaking as a former child who had to grow up. ๐
I think Mary meant that Millie shouldn’t use money that she had set aside for her retirement to bail her daughter out, because Social Security and pensions just aren’t the safety nets they used to be anymore. Of course, I’m Canadian, so don’t know much about American pensions or Social Security. Up here it’s called Old Age Security and people living on it and nothing else are basically living on poverty wages.
I have to disagree here. I was once that daughter in debt. Though I was long out of college and instead the debt had to do with vet bills that piled up. My parents bailed me out and I have been forever grateful with a lesson learned. And more than 20 years later I haven’t had any debt since! I use my credit cards quite a lot, but never for an amount that can’t be paid off in one or two billing cycles. I’m not lying – my husband and I have zero debt. Granted, we don’t own a home, but we have enough savings to last more than 6 months, both of us have credit scores over 800, money going into a 401k and IRAs, both cars are paid for, and all credit cards are almost always paid in full each month. And I have my parents to thank for this!
You’re the exception, not the rule. Plenty of people can and will take advantage of parents or some other relative who will “save” them financially. One of my older sisters and her husband kept having to be “saved” by my parents. The only time it was ever debt, was once when they had bought a house that was too expensive for them and things came crashing down for them. They either couldn’t pay the mortgage, or the mortgage was the only thing they could pay for, all other bills went unpaid. I think my parents had given them money before this to get out of some scrape or another. And they did after, to the point that my parents gave them money one last time, and told them to either sink, or start swimming.
u can disagree all ya want. mary is correct. i have numerous friends who’s children got them in debt. not once, but several times. despite professional counsel, they bailed them out. three of these “children” have been thru bankruptcy, etc. i not only refused to help my daughter, i DID NOT PAY F0R HER COLLEGE. she paid for it. she recently gave me jewelry inscribed “All I am, You helped me to be I LOVE YOU MOM.” certainly circumstances alter cases, there a times a child needs help and they should b helped, but not when the behavior is detrimental and repeated. let them work and learn.
My only question is… did you pay back your parents? And if so, did you pay back with even a token amount of interest to show gratitude for them bailing you out?
I wholeheartedly agree with you! I got in over my head as a young person, my mom advised me to get credit cards to build up my credit. EEK! It took a lot of hard work to get out and I will never get into debt again. My parents did bail me out (twice) so the stats are right on. I’m raising my children with a healthy respect for money and living beneath their means. I must give kudos to you, Mary, I found your blog and now we are completely debt free! Thank you!