First-year college students, many
away from home for the first time, face many temptations. They likely
have been warned about sexual impurity and binge drinking, but they
may have received little or no parental advice about a subtler lure:
credit cards.
Typically, students registering
for fall classes also must make their way past a myriad of tables where
trained credit card representatives press them to apply for a card in
exchange for a free T-shirt with the school’s logo. Applicants
need no co-signer or proof of income to obtain a card with up to a $5,000
limit.
Nellie Mae, which issues federally
guaranteed student loans, reported earlier this year that college undergraduates
carry an average credit card balance of $2,748, up from $1,879 only
three years ago. Nellie Mae indicated that 78 percent of college students
had credit cards while 32 percent had four or more.
Credit card companies and banks,
which mailed 3.3 billion credit card solicitations last year —
about 30 per household — spend billions of marketing dollars telling
students they deserve large lines of credit. Students entering Christian
schools are no exception. Once at school, students regularly receive
card offers in their mailboxes.
"It’s amazing how many
incoming students already have a credit card or have been approached
about getting one," says Jennifer Fetters, senior financial aid
counselor at Northwest College in Kirkland, Wash.
Mary Hunt, author of Debt-Proof
Your Kids and editor of Cheapskate Monthly newsletter, advises parents
to allow college-attending children to have a card only if it’s
in the student’s name and has a $500 limit. Many parents have found
their credit rating ruined by children who have charged thousands of
dollars to their account, Hunt says. She also recommends that any balance
be paid immediately so that no interest charges accrue. She says students
shouldn’t obtain a card with an annual fee or one that promises
payoffs, such as free airline miles or discounts on a new car the more
it is used.
"It’s easy to say I’ll
pay for it later," Fetters says. "But if you buy a $15 pizza
with a credit card it ultimately can end up costing you $45."
The average annual cost of tuition
at a private four-year college escalated to $16,332 in 2000, meaning
that few students can make it through without borrowing money. "The
Bible does not prohibit borrowing," says Atlanta-based financial
expert Ron Blue, author of Raising Money-Smart Kids. "Rather, Scripture
discourages it by pointing out the dangers associated with going into
debt. Students should not go into debt without a carefully considered
repayment plan."
Experts say credit cards aren’t
inherently bad, especially if students need to pay for an unexpected
car repair or flight home. However, many collegians are looking for
ways to defer not only tuition costs but also everyday expenses. Innumerable
first-year students have found plastic cards a way of easily acquiring
items such as DVDs and CDs.
"It’s nice to have a credit
card for emergencies, but the latest sale at Nordstrom’s is not
an emergency," Fetters says. "Students need to learn to live
within their budget. We advise them not to buy anything unless it’s
absolutely necessary."
"Students can easily run up
$25,000 in debt their freshman year in college," says Hunt, who
lives in Garden Grove, Calif. Hunt advises students to flee the temptation
of putting tuition payments on credit cards. "Education at a pricey
private school is not a given right," she says.
Hunt says it’s a fallacy to
presume that debt will quickly be paid off upon graduation. Many students
start raising a family and take on a mortgage soon after college. In
addition, others fail to attain the dream job they sought, which makes
a monthly $300 Visa or MasterCard bill a tremendous burden.
First-year students who run up bills
they cannot pay can set in motion a life-changing trajectory. Some have
to decrease their class load and increase their work schedule, which
can cause a drop in grades. Some drop out entirely to pay off debts.
