Charge Now, Think Later

cards, cards, cards

The first week of college can be like a carnival. There are people and vendors everywhere. You can buy purses, candles, jewelry, musical instruments, posters, handmade art, and food. You can sign up for sororities and frats, join clubs and sign petitions. You can buy local newspaper subscriptions and sell used textbooks. Mixed in with all of this are the credit card solicitors. They have pounds of M&M's, and t-shirts flowing from their boxes. They give away soda and pizza. They have games and giveaways and they almost always draw a crowd. But they're too busy asking whether you want a large or an extra large T-shirt to say anything about interest rates or fixed APR.

I am pretty good with money and I don't buy much. President Bush wouldn't approve. Okay, so I have a CD habit, but I keep it under control most of the time. I pay a lot in rent, but I try to balance it by keeping the grocery bill down. So I was shocked when I sat down to add up my debt.

I just graduated college and I have to start paying back my student loan soon. Well how, I keep thinking, am I going to be able to pay off $15,000 when I can never seem to get my credit card balance below $1,000?

It's official. I'm a statistic. But I'm in good company.

Handing Out Plastic
The average college student will graduate owing over $15,000 in student loans, and nearly $3,000 in credit card debt, according to federal statistics. In 2000, 78 percent of US students had at least one credit card, according to major student loan provider Nellie Mae. And many college students now have three or four.

It hasn't always been this way. Going to college and getting a credit card didn't used to be this easy. In the early 1980s credit card companies discovered the college market. A 1983 article that ran in the New York Times quoted experts who advised college students to start earning credit through smaller cards like the kind you get through a department store. By the middle of the 90s, however, Visa and MasterCard were directly targeting college students. In 1995 The Los Angeles Times reported on Generation X's credit problem. The average debt for student loans alone has gone up $5,000 since then. The problem is snowballing.

Isn't it good to have a credit card before graduating? you may be asking. Yes. Using a credit card to make small purchases and then paying the balance in full is a good way to start a positive credit report, which will later be used and viewed when you apply for jobs, apply for loans, buy a house or a car, or apply for more credit cards. Good credit history is smart spending. And it is very hard to get a credit card after you graduate if you do not already have one.

The problem is that credit card solicitors don't ever stop. They offer interest-free balance transfers, send checks in the mail, and extend your line of credit. But they still expect you to pay. My credit limit has been raised twice since I got my card five years ago. I get at least three credit card offers in the mail every week and probably ten times that many over email.
Legislation can stop some credit card companies from soliciting on campuses, but it cannot stop students from spending.

So now you're a college student making nothing, or maybe you have a job, but you have very little spending money. You have a credit card or two with $5,000 limits on each and that makes life a bit easier, until the bills come.

Not paying those companies can ruin your credit. A bad credit report can stay with you for over seven years, longer than most of the stuff you bought with your card. Paying the minimum balance each month only makes the pain last longer because you're stuck paying as much as 20% interest.

Some students have dropped out of school to pay off their debt, delaying their education and their hoped-for careers. When you're young and broke, this can feel like a big dead end. In 1997 a freshman at the University of Central Oklahoma hung herself in her dorm room. Spread around her room were bills and her checkbook. She owed $2,500 to her credit cards and had just lost her part time job.

While it rarely results in such extremes, the tragedy of mounting college debt is starting to scare government leaders and policy makers. Fifteen states currently have or are considering legislation concerning credit card solicitation on college campuses. Many statutes target the freebies that are intended to lure students. They hope to cut down on the barrage of vendors and their goodies.

Others demand programs to teach students how to manage their finances. Some of the legislation is aimed at the credit card solicitors, but a lot of it is to protect parents from getting saddled with their child's debt.

In some states credit card vendors are only restricted from visiting public universities. In California, only California State Universities and the city colleges prohibit offering free gifts in exchange for credit card applications. The law also means tougher restrictions on how credit cards are marketed on campuses. If current legislation is passed in New York, all State Universities and City Universities will be restricted.

The Man Puts on the Brakes
Legislation can stop some credit card companies from soliciting on campuses, but it cannot stop students from spending. Nor can the governement stop young people from obtaining credit cards. Policy makers can only try to slow the debt that is plaguing this generation of students.

No one is offering solutions for those young people already in debt. Over two thirds of the debt most students incur while in college is in the form of student loans. Going to college is about spending beyond your means. For many of us, debt is a normal part of life. If I weren't in debt right now, I wouldn't have a B.A.
Website's help parents keep tabs on where their kids are spending the money. Visa also provides an email service that will notify the parent whenever the child makes a purchase at a store that is part of a list of retailers which may sell inappropriate merchandise.

Right now no one teaches seminars on managing money while in college. But if passed, the proposed legislation will require colleges to hold such seminars so students can learn to cut back on their beer and pizza without going cold turkey. These seminars would be held during freshman seminars and open houses for incoming students.

College students may never stop buying beer and pizza. Even so, some may argue that freshman year be too late. Many young people now have the opportunity to get a credit card before college. While the big money still comes from college students, the new target is teenagers as young as 13. Credit card companies know to get us while we're young.

Like Giving Candy to a Baby
New cards like Visa Buxx are parent controlled debit cards targeting teenage spending. Parents decide how much money the card is worth, put that amount into the card, and then hand it over. The card is used until it hits its limit, and then can be reloaded with more money at the parent's discretion. Website's help parents keep tabs on where their kids are spending the money. Visa also provides an email service that will notify the parent whenever the child makes a purchase at a store that is part of a list of retailers which may sell inappropriate merchandise. Parents can now hand over allowance in the form of a credit card instead of cash and control what that money is spent on. All with the convenience of a card that has your name on it and is accepted anywhere they accept Visa.

But the benefits also have drawbacks. Buxx is a debit card, and draws off an existing balance. These cards claim to be teaching tools, helping kids learn how to handle finances. But what is the difference between $30 on a credit card that gathers no interest and doesn't have to be paid back and $30 in cash?

Financial responsibility is something you have to learn on your own. Sometimes that may mean making mistakes, and incurring some debt. But, despite what credit card companies want us to think, the two are not synonymous.

I learned to handle money and responsibility through the series of part time jobs that started when I turned 14 and continues to this day.

The messages are mixed. We are in a time of crisis, and our government is not telling us to tighten our belts and grow a victory garden. Instead, in order to be good Americans, we are being told to spend. Yeah for consumerism. In the face of company layoffs and a recession we are being told that greed is good. Oh, but don't forget kids, debt is bad.

Elizabeth Zipper is the WireTap editorial intern.

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