Credit cards could mean trouble |
Jason Rogers |
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A study conducted through a national provider of student loans has uncovered an unsettling trend. According to Nellie Mae, a resource for student loans and financial aid, the typical college undergraduate averages $2,748 in credit card debt, up from $1,879 in 1998. If the typical student pays only the required minimum balance and the bank card averages the standard 18 percent annual percentage rate, it will take 15 years for the student to pay off the balance. Half the payments will be for interest expenses. The Nellie Mae study reports one out of 10 undergraduates has a credit debt of $7,000 or more. As students move into graduate programs, their debt deepens. According to Nellie Mae, 95 percent of graduate students carry an average debt of $4,776. Of those 95 percent, 6 percent carry an amount of at least $15,000. The report concludes by pointing to one probable culprit: the credit card. According to Nellie Mae, 78 percent of all undergraduates carry plastic, an increase of 11 percent over the last three years. Of the 78 percent, roughly a third own four cards or more. Nina Prikazsky, vice president for operations at Nellie Mae, pointed to slackened controls at major credit card companies. "Students tend to get into trouble very quickly with these credit cards. The more easily they are available, the more students will take on," Prikazsky said. "Students are borrowing more. Students annually assume more debt of all kinds year to year and it has ramped up considerably since the '70s. In general, students in the '70s could not obtain a credit card without a cosigner or employment." Prikazsky said today, credit cards are solicited on campus, in direct mail and in publications in bookstores. "They (students) will apply for credit and their parents won't even know that their kids qualify for these things," Prikazsky said. She added that freshmen receive piles of credit card applications when beginning college. Spokeswoman Catherine Pulley for the American Bankers Association said student financial issues aren't as bleak as they seem. According to the ABA, college students are, on average, $584 in the red, compared to the national average of $2,563. "College students are more responsible with credit (than the average borrower)," Pulley said. She pointed out a statistic boasting that 59 percent of college students pay their monthly credit card bill in full, opposed to 40 percent of the national population. "We need to remember that in the 18 to 23 bracket, not everybody goes to college," she said. "When an 18-year-old applies for a credit card, you cannot always assume that they are in school. To blanket the 18- to 23-year-old market and say that all of them are college students is really not an accurate description." Robert Manning, a senior research fellow at the Institute for Higher Education, Law and Governance at the University of Houston Law Center said surveys do not take all factors into effect, and therefore, important variables are not included. According to Manning, analyzing the debt levels of all college students at a single point during the academic year statistically reduces average debt levels. "If you do your survey early in the fall, you will have the lowest possible debt because students are just starting," Manning said. "That's why taking an average is erroneous because most (polled) students are freshmen." Manning continued: "In terms of working with the (federal government), the banking industry is really thwarting any efforts to do the type of survey research that is required." | |