College Students Face Consumer Debt

When college students talk online, you’d expect them to discuss things like classes or dorm romances. What you might not expect are messages about life with plastic.

“Credit cards have definitely made my life harder,” one frustrated card user writes on CollegeClub.com, an online community of college students. “Credit is a blessing and a curse,” responds another.

As thousands of students head off to college each year, credit-card recruiters are waiting, with applications in hand, to recruit new cardholders. And with teenage consumerism on the rise, marketers are making credit more appealing and more available to students than ever before.

But that appeal can be ruinous, experts say, especially for those who lack the financial experience needed to handle a credit card.

Now, in response, lawmakers around the country are seeking legislation that would limit the availability of cards on campus and combat credit’s seductiveness.

A Degree in Debt

Students are faced with a barrage of hard-to-resist credit-card offers outside college classrooms and dining halls, and in their dorm mailboxes. Card recruiters set up tables in high-traffic areas on campuses and offer free gifts — compact discs, T-shirts, coffee mugs and posters — to lure new credit applicants.

The pitch apparently works. Seven in 10 undergraduates have at least one credit card, a recent study by the Consumer Federation of America found.

But many experts agree that those applicants often apply for credit on a whim and lack the financial knowledge and resources to manage a credit account. The vast majority of those college students with credit cards got them during their first year in college and, astonishingly, one in five college cardholders carries debt of more than $10,000.

As the number of card-carrying students rises, so does the debate over whether college students should have such potentially devastating access to personal credit cards.

The 1997 suicide of University of Central Oklahoma freshman Mitzi Pool has prompted many consumer advocate groups to bring the marketing techniques of card issuers into focus.

Pool was emotionally distraught after losing the part-time job she was dependent upon to pay off her three maxed-out credit cards, Pool’s mother said at a press conference last year. She was found hanged in her dorm room surrounded by credit-card bills and her checkbook.

States Step In

“[Credit card] companies must work to market credit responsibly to students,” says Washington State Senator Julia Patterson.

Patterson, along with 15 other state senators, has made headway with legislation in her state that could severely limit the marketing strategies of credit-card companies and prevent financially dependent persons under 21 from obtaining credit cards on their own.

The proposed bill could also put an end to incentive-based college credit card applications in the state of Washington.

“Why should any 18- or 19-year-old who is still financially dependent on his or her parent be able to obtain [credit] limits that they can’t possibly support?” Patterson asks.

The Washington effort isn’t unique. In 1999, Louisiana and Arkansas enacted legislation that restricts on-campus marketing of student credit cards. California, Tennessee, Virginia, West Virginia, Pennsylvania, New Jersey and Virginia have seen bills as well.

Similar legislation was even introduced to the U.S. Senate Banking Committee last April, but died in committee.

Many of the proposed bills would not only restrict the marketing tactics of credit-card issuers on campuses but would require colleges to educate students about using credit responsibly.

Many colleges not only permit on-campus marketing, maintains the Consumer Federation report, they benefit from it financially. Card companies sponsor student activities and pay rental fees in order to solicit on campus.

Students Want to Establish Credit

But not all students use their credit cards recklessly.

Just over half of the students applying for credit do so in order to establish their credit history early, reports the Institute for Higher Education Policy, a nonprofit, nonpartisan research organization.

“Most of our college students use their credit cards responsibly,” Discover Card spokeswoman Cathy Edwards says. “Students are much more aware than they used to be.”

Discover Card holds “tabling events,” where students receive free compact discs or T-shirts in exchange for applying for Discover Card membership. However, Discover maintains that their card members are aware and informed.

And Discover, along with many other leading credit companies, has responded to the growing concern over student access to credit by launching campaigns aimed at students and their parents.

The card issuer’s current television commercial — featuring a college freshman spending wildly using his parents’ credit card — seeks to create “a humorous depiction of a potentially serious situation,” Edwards says.

Discover and experts alike encourage parental involvement in a student’s decision to obtain a credit card and remind cardholders to read carefully all disclosures and documentation before completing a credit application.

For now, CollegeClub.com users continue to spread a word of caution on their own to fellow students. One 23-year-old user writes, “If I had just waited a year, I would have heard all the advice and warnings, and been a wiser spender.” — Mike Scott contributed video to this report.

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