College students rack up debt as credit card use increases
According to a new study, four out of five undergraduate students favor the regulation of aggressive credit card marketing on college campuses. The survey examined credit card trends in students, such as number of cards in possession, amount of times marketing mail is received, and the parties responsible for paying the bills.
The data, released April 1, was gathered by the federation of state Public Interest Research Group (PIRGs) from October 2007 to February 2008. The test population consisted of about 1500 undergraduates at 40 universities in 14 different states.
Credit card companies have gone to such extents as Facebook advertisements and free T-shirts, frisbees, and Subway sandwiches, marketed directly on college campuses, according to U.S. News & World Report.
According to the study, three in four students have at one time stopped at a credit card marketing table to consider an offer.
While aggressive, the study showed that these efforts are paying off, for credit card companies at least.
Karrie Song, a first-year H&SS major and owner of four credit cards, commented on the addictive quality of credit cards and marketing campaigns.
“There are so many discounts available for credit cards — free $25 at Amazon, Discover cash back, Macy’s 10 percent discounts. If it weren’t for all these bargains I would have never signed up,” she said.
The survey said that two out of every three students possess at least one credit card.
However, the efforts have not exactly paid off for students, many of whom are regularly in debt.
George Loewenstein, a professor of social and decision sciences, warned students against the hidden dangers within credit card bills.
“There should be regulation of deceptive marketing, but there should also be regulation when it comes to hidden fees, interest rates, and other aspects,” Loewenstein said. “The worst development at the moment is credit cards that allow one to borrow automatically against one’s retirement saving.”
Christine Lin, a first-year information systems major, echoed Loewenstein and spoke of the consequences associated with credit cards.
“People aren’t educated or aware of either the consequences or benefits of credit cards. If you’re not careful, you’ll graduate college with mounds of debt on top of your owed tuition money,” Lin said.
The data suggested an average debt of $1301 and $2623 for college first-years and seniors, respectively.
“Sometimes students’ parents pay their bills and similarly pay for their credit cards. College is the transition from being a dependent of your parents to an independent adult that must pay her own bills,” Lin added.
The study estimated that 30 percent of students surveyed had their credit card bills paid by their parents while the remainder paid out of their own pocket.
Due to this growing trend of credit card possession, a number of universities are making an effort to educate students on how to manage credit card bills, according to U.S. News & World Report.
The University of North Texas opened a Student Money Management Center that offers prizes such as free food to convince students to attend free financial seminars and workshops.
At Pennsylvania State University at Erie, students in their required first-year seminar programs receive credit management training.
However, according to Loewenstein, student education on credit cards can only go so far.
“I don’t think the problem is that people don’t understand how they work, just as the problem with cigarettes isn’t that people don’t understand they are addictive and harmful to your health. The problem is that people think that they will be able to keep their spending under control, but credit cards make it too easy and too tempting to lose control of spending,” Loewenstein said.
Song shared a similar opinion to Loewenstein, in that outside regulation or education has its limits.
“I feel that regulation is no use because if students are irresponsible with their money they will have to learn sooner or later the consequences of mismanagement,” she said.
Robyn Dawes, a professor of social and decision sciences, suggested a paternalistic approach to college students obtaining credit cards.
According to Dawes, if a student really wants to go through with the initiative, he or she will defy the default option and will thus have to deal with the consequences.
“Consequently I am in favor of allowing students to obtain credit cards if they wish to do so by taking action — but not in favor of their getting credit cards automatically,” he said.
No matter what approach one may take on credit card possession among today’s youth, the study has made it clear that this topic is an extremely relevant one for today’s college students.