A study conducted by the U.S. Public
Interest Research Group (PIRG) revealed that students
who obtained a credit card at on-campus tables have higher
unpaid balances than those who do not. Many of these
same students pay only the minimal balance each month,
which can quickly lead to incurring excessive debt. Moreover,
students who abuse credit cards at the onset of college
may unknowingly suffer long-term consequences—from
damaging their credit to lessening future chances of
purchasing big-ticket items such as a car or home or
even securing student loans for additional education.
"Although many students understand and manage the
responsibilities of borrowing, there is apprehension
that some students
are setting themselves up for financial failure even
before graduation," says Marie O’Malley, Vice
President of Marketing for Nellie Mae, a leader in helping
students
borrow responsibly and manage debt. "Without assistance,
these students may not have the know-how to borrow wisely
on the front end nor the income to honor their credit
obligations after they’ve borrowed."
According
to Nellie Mae’s 2005 report Undergraduate
Students and Credit Cards, 43 percent of undergraduate
cardholders obtained their cards freshman year. Today,
the average college freshman has more than $1,500 in
credit card debt. By the time that student graduates
four years
later, the amount has increased two-fold. A newly released
study from the American Council on Education (ACE)
on credit card ownership and college
students offers
further insight. Findings
from Credit Card Ownership and Behavior Among Traditional-Age
Undergraduates,
2003-04 showed that the likelihood of owning a credit card
increases as students progress through their academic
careers. While
43 percent of first-year undergraduates owned credit
cards, the figure rose to 74 percent for fourth- and
fifth-year
students. Further, students became more likely to hold
multiple cards as they advanced through college. In
the first year of college, only 8 percent of all undergraduates
owned three or more cards. By the fourth or fifth year,
24 percent of students held that many cards.
Interestingly,
the ACE study found that students with credit cards
were not significantly more or less likely
to borrow
student loans than those who did not have a credit
card. Students who carried a balance on their card
were somewhat
more likely to also have borrowed a federal student
loan than those who paid off their credit card balance
each
month (42 percent, versus 34 percent), suggesting
that these students may have turned to credit cards to
augment
what they had borrowed through student loan programs.
A
number of colleges and universities have taken on the
issue of on-campus credit card marketing,
offering
money-management
and financial literacy programs during freshmen
and parent orientation or providing similar information
in bookstore
shopping bags, to help students fully understand
the ramifications of credit. Some schools, including
Lehigh
University and
the University of Wisconsin, ban on-campus credit
card marketing altogether.
"Students should expect to be deluged with credit
card offers while at college, particularly at the start
of
the new academic year," says Nellie Mae’s O’Malley. "These
offers will be mailed to them, will pop up on Web
sites and will also be on campus. It would be ideal if credit
card companies agreed to take a more conservative
lending approach to students to prevent them from getting too
deeply into credit card debt while in school.
"More
practically, however, students need to learn how to manage their finances.
Credit cards and other borrowing
options will continue to be available to them
while they are in college and after they graduate. Credit
card use
and borrowing money have become common practices
in American society and aren’t going to cease. The wisest
course is to teach students to limit credit card
usage and to
borrow wisely."
For more on credit and college
students, visit these consumer and education
Web sites:
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