to students causes
lawmakers, educators to melt down
volatile combination of credit cards and college students is causing
Legislators, college administrators
and consumer advocates all are shaking clenched fists at credit
card companies for pushing cards on cash-strapped college students.
The problem is that students are
flooded with offers from card issuers. They often set up tables
right on campus at the start of the school year to hand out applications
and free goodies. More offers land in students' hands at the college
bookstore, stuffed into bags with the receipts. Still more get pinned
to bulletin boards.
As a result, some students get
in over their heads and start out their adult lives deep in a financial
Now, Congress and several state
legislatures are considering bills that would curb the marketing
and issuing of cards to college students and force the card issuers
to pump up educational efforts.
Colleges are outraged as well.
More than 300 colleges and universities have banned credit card
marketers from their campuses. Another 140 universities are set
to give card marketers, their tables and their freebies the boot
by the end of the year, according to United
College Marketing Services in Oak Brook, Ill.
"We're not credit bashing," says
William Stanford, financial aid director at Lehigh
University in Bethlehem, Pa., which banned card marketers from
its 6,300-student campus in January 1997. "We're just trying to
level the playing field so the student has a fighting chance."
Mary Rouse, dean of students at
of Wisconsin, which has long banned card marketers from its
Madison campus, says credit card debt "puts young people behind
the eight ball. It exacerbates the educational loan debt that's
getting in deep
The average undergraduate has $1,843 in credit card debt, according
Mae, a student loan provider. Nine percent have card debt between
$3,000 and $7,000. One-fifth of all college students have four or
more credit cards.
10 steps for students who
want to handle credit wisely
The risks are higher than ever if a student
racks up lots of card debt. More employers and landlords are
checking the credit reports of job candidates, so the cleaner
the credit, the better. Here are the experts' 10 steps for
handling it wisely.
1. Always remember that credit is a
loan. It's real money that you must repay. Before you apply
for the first card, decide what the card will be used for
-- Emergencies only? School supplies? -- and determine how
the monthly bills will be paid.
2. Go slowly. Get one card with a low
limit and use it responsibly before you even consider getting
4. Study your card agreement closely,
and always read the fine print flyers enclosed with every
bill. Credit card offers differ substantially, and the issuer
usually can change the terms at will with 15 days' notice.
5. Try to pay off your total balance
each month. Just paying the minimum is a trap: If you pay
off a $1,000 debt on an 18 percent card by just sending in
the minimum each month, it will take more than 12 years to
6. Always pay on time. A single slip-up
will place a black mark on your credit record -- and likely
will cause your issuer to jack up your interest rate to the
7. Set a budget, follow it closely
and watch how much you're paying on credit. A good rule of
thumb is to keep your debt payments below 10 percent of your
net income after taxes. So if you take home $750 a month,
spend no more than $75 a month on credit.
8. Keep in touch with your issuer by
notifying the company promptly when you move. In the event
you must be late on a payment, call them before it's late.
They want your business for life, so they may be willing to
make alternate payment arrangements that won't leave a mark
on your credit rating.
9. Close accounts you aren't using.
Having available-but-unused credit counts against you when
it comes time to buy a car. That's because lenders don't like
it when you have the ability to quickly go deep into debt.
10. At the first sign of credit danger,
such as using one card to pay off another, make the card harder
to use. Only carry it when you plan to use it, lock it up
in an inaccessible place or entrust it to your parents.
A scathing new study from Georgetown
University sociologist Robert Manning and the Consumer
Federation of America is adding fuel to the fire. It suggests
that past studies of students and credit cards have under-reported
"The unrestricted marketing of
credit cards on college campuses is so aggressive that it now poses
a greater threat than alcohol or sexually transmitted diseases,"
His study estimates that a whopping
one-fifth of students at four-year universities carry credit card
debt of $10,000 or more. The true size of credit card debt is hidden,
the study charges, because part of it gets refinanced with student
loans or with private debt consolidation loans.
Credit card companies aren't the
only lenders to target students. Payday lenders have begun setting
up shop near college campuses, offering short-term loans at sky-high
interest rates to students caught in a financial pinch.
students get in credit trouble
Manning says several factors are pushing more and more students
into consumer debt, including "the extension of unaffordable credit
lines, increasing education-related expenses, peer pressure to spend
and financial naivete."
Stanford estimates that 10 to
15 percent of the students at Lehigh have been "stung" by problems
with credit card debt. Plenty of times parents step in -- just as
card companies expect -- and pay down the bills. Other students
aren't so lucky, such as a Lehigh sophomore who is facing $5,000
in card debt.
"The monthly payments are choking
him," Stanford says.
Lonnie Williams, director of Consumer
Credit Counseling Service in Austin, Texas, tells a similar story.
"We see some students reduce course
load to work more hours at a part-time job. We also see them apply
for student loans to pay off what they've run up on credit cards,"
Williams says. "In some cases they drop out for a semester or a
year and think they can pay it all off and go back."
She pauses and adds, "Once they've
left school, it gets real hard to go back."
The Austin area has seven colleges
and universities, including the 48,000-student University of Texas
main campus. Six or seven years ago the number of student clients
at her counseling service was "so negligible we hardly thought about
it," Williams says. Today, students make up nearly 15 percent of
She believes the increase in card
debt among college students stems from "lack of knowledge and very
state lawmakers react
Legislation proposed in Washington and around the country is aimed
at changing that.
900, introduced by U.S. Rep. John LaFalce (D-N.Y.), would
ban issuing credit card accounts to anyone under 21, except with
parental approval or evidence of means of payment.
- Legislators in Oklahoma and New York are
weighing bills similar to LaFalce's.
- A bill in Tennessee would ban credit card
promotions on public colleges.
- A California bill would ban card marketers
from handing out free gifts unless they are accompanied by educational
brochures on credit; require credit education programs and counseling
sessions on campus; and require credit information in brochures
stuffed in shopping bags at college bookstores.
- A Louisiana bill would prohibit college
administrators from giving the names and addresses of students
to credit card companies without students' permission.
- A resolution in Virginia calls for the state
Department of Agriculture and Consumer Services to provide consumer
credit information to college students, parents and universities.
smarts begin at home
Many colleges and universities are stepping up credit education
efforts as well, but experts say the best education starts at home
"Parents, whether they believe
it or not, are the No. 1 source of financial information, according
to surveys of students," says Richard Flaherty, president of College
Parents of America.
The organization's Web site includes
a "Money Talks" section with money management guidelines and tips
for selecting and using a credit card as well as advice for parents
on how to get the conversation going.
"Many times parents and students
aren't comfortable talking about money matters," Flaherty says.
"They're not sure how to begin that dialogue."
During the financial heart-to-heart,
parents should be sure to discuss annual percentage rates, teaser
rates, late fees, over-the-limit fees and minimum monthly payments.
Another key point to discuss is who will be paying the bill.
Express also have Web sites with financial tips and advice geared
toward college students.
United College Marketing Services
has been conducting educational seminars on college campuses for
more than a decade. Students arrive on campus with almost no knowledge
of credit, says Dennis Meunier, the company's vice president of
marketing. "The freshmen don't know anything coming in," he says.
By the time they're upperclassmen,
the students are often deep in debt and looking for ways to cut
"They say, 'I have $3,000 or $4,000
in credit card debt. I have three or four cards. What can I do?'
" Meunier says.
The best bet is to try to consolidate the debt onto the card
with the lowest interest rate and then work on paying down the balance,
he says. If it's not possible to consolidate the card debt, focus
on paying down the balance on the card with the highest interest
In its sessions with students,
United College Marketing Services also gives some advice card companies
are unlikely to give -- such as calling a card company and asking
for lower interest rate.
"They don't know that they have
a lot of negotiating power," Meunier says. Many times, card companies
will, if pressed, cut a break for a student because they want to
keep the young debtor for life.
A student who slips up once on
a card payment, for example, may be able get that late fee waived
with one quick phone call.
"Nine times out of 10, they'll
waive the fee to keep the account," Meunier says.
-- Posted: June 21, 1999