Credit cards: big debt on campus

They're young, they're keen to assert their independence, and they are being offered credit cards wherever they turn.

It's become a college rite of passage.

Even before this year's freshman class settles into their dorm rooms, the credit card offers will be rolling in. Fifty-four percent of freshman students carry a credit card. By sophomore year, the number rises to a whopping 92 percent. And 47 percent of college students have four or more credit cards, according to a 2001 study by Nellie Mae, a national provider of higher education loans.

No income? No problem
It is so easy for college students to qualify for a credit card because credit card issuers realize that parents can be counted on to bail out students who run up oversized balances or fall behind in payments.

And credit card issuers want college students as customers because students tend to be loyal to their first credit card, and they'll keep on charging long after graduation.

Credit card issuers used to require parental approval before issuing a card to students who had no independent income source, but they abandoned that hands-off strategy in the '90s.

Colleges are raking in the dough
Instead, the card issuers aggressively went after the student market. They allied themselves with college campuses with exclusive marketing agreements. According to Robert Manning, author of the book "Credit Card Nation," those deals now yield the nation's 300 largest universities nearly $1 billion a year.

Used well, credit cards can play an important role for college students. They teach financial responsibility and ease the way into the postgraduate financial world.

But credit cards can also leave financial bruises that don't heal until long after the diploma has yellowed on the wall.

It doesn't come easy
Too often, students learn about the high cost of credit cards the hard way: after they run up balances. It's a problem that's getting worse, according to Nellie Mae's research.

Twenty-one percent of undergraduates who have cards have high-level balances between $3,000 and $7,000; a 61 percent increase over the 2000 population. Between the time they arrive on campus and graduation, students double their average credit card debt and triple the number of cards in their wallet.

Check out this syllabus full of answers for students and parents on the unique features and traps of credit cards targeted to students.