College Students Face Consumer Debt

Feb. 15, 2001 -- When college students talk online, you’d expect them to discussthings like classes or dorm romances. What you might not expect aremessages about life with plastic.

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

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

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

Now, in response, lawmakers around the country are seeking legislation thatwould limit the availability of cards on campus and combat credit’sseductiveness.

A Degree in Debt

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

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

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

As the number of card-carrying students rises, so does the debate overwhether college students should have such potentially devastating access topersonal credit cards.

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

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

States Step In

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

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

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

“Why should any 18- or 19-year-old who is still financially dependenton his or her parent be able to obtain [credit] limits that they can’tpossibly support?” Patterson asks.

The Washington effort isn’t unique. In 1999, Louisiana and Arkansasenacted legislation that restricts on-campus marketing of student creditcards. 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 ofcredit-card issuers on campuses but would require colleges to educatestudents about using credit responsibly.

Many colleges not only permit on-campus marketing, maintains the ConsumerFederation report, they benefit from it financially. Card companies sponsorstudent 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 toestablish their credit history early, reports the Institute for HigherEducation 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 moreaware than they used to be.”

Discover Card holds “tabling events,” where students receive freecompact discs or T-shirts in exchange for applying for Discover Cardmembership. However, Discover maintains that their card members are awareand informed.

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

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

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

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