2A THE UNIVERSITY DAILY KANSAN
STUDENT FINANCES
FRIDAY, DECEMBER 2. 2005
Source: Nellie Mae
Year
The average amount of credit card debt has risen $290 from $1,879 in 1998 to $2,169 in 2004, but this is still a $579 decrease from the 2000 high of $2,748. From 2000 to 2004, the overall number of students carrying cards with balances over $1,000 declined, lowering the average amount of credit card debt.
Jared Soares/KANSAN
Joshua Bickel/KANSAN
College students are inundated with credit card offers, which makes it easy for them to acquire cards and accumulate debt.
Older students are more likely to carry credit cards than freshmen and typically rack up more debt.
CLASS COMPARISON
91 percent of final-year students have a credit card.
Only 42 percent of
Hooked
freshman do
♦ 56 percent of final-year students carry four or more cards.
CONTINUED FROM PAGE 1A
♦ Final-year students carry an average balance of $2,864, while freshmen carry an average balance of $1,585.
Only 15 percent of freshmen do.
Source: Nellie Mae
The interest rate for first-time borrowers is about 20 percent.
Penalty fees are a problem for many students. Baker said that 50 percent of all profits that credit card companies make off students were for late fees. More than half of credit card companies charge $39 for a late payment. It's easy to miss the notification that one has a late fee because it's on a different part of the bill, Baker said.
Credit card companies make contracts more difficult than they should. Baker said about the small print.
"You get the idea they don't want you to read it," he said.
Veatch said she didn't even read the terms for her credit card contract and didn't know the interest rate that she was being charged.
"I don't understand them at all so that's why I don't look at them. I just thought you charge it and you pay it back and that's all there is to it," she said.
Veatch said she wasn't that worried about her debt at first, but now she's starting to feel the pressure. She can't go out with friends because she has no money, so it has affected her social life.
help debtors pay off their debts sooner, provided they have the money for the higher monthly payment.
The constant calls from the credit card company — up to 11 a day — serve as constant reminders that she owes money.
Government intervention
Students want to live the same lifestyle they lived before coming to college, Baker said. Once they begin college, many students are independent financially but continue to live as if they still have support from their parents. Students often don't realize that the money they are making must now go toward rent or food rather than entertainment and other discretionary spending.
"The only way you can speed up paying off your card is making a higher payment." Baker said. "If you can pay the balance quicker you can pay less interest."
Though the higher minimum payments were installed to help debtors pay off the debt in less time, the increase has not necessarily helped
To help debtors, the government has required credit card companies to raise the minimum payments from 2 to 3 percent per month to 4 to 6 percent. This higher minimum payment will
students because they have to come up with more money each month.
Why so much spending?
Students want to live the same lifestyle they lived before
coming to college, Baker said. Once they begin college, many students are independent financially but continue to live as if they still have support from their parents. Students often don't realize that the money they are making must now go toward rent or food rather than entertainment and other discretionary spending.
"Try not to live on a champagne budget if you're a poor student, and I know that's more easily said than done," Baker said.
Instead of altering their lifestyles, Baker said many students began charging purchases to credit cards.
Social situations made it difficult for Veatch to refrain from spending money. She wanted to eat out with friends, go shopping and hit the bars.
"In social situations is when I'm worst because I don't resist very much," Veatch said.
Students can use credit cards almost anywhere and for almost anything. Fast food companies like McDonald's and Sonic now accept
Put it on the card
plastic. Gas is a common credit card purchase and some students even use cards to pay for tuition. Credit cards are versatile and convenient, but that convenience is a double-edged sword.
Credit card usage has other benefits besides convenience. Cards take up less space than cash and checkbooks. Having a credit card can encourage students to behave responsibly and be independent financially, provided they monitor the use of their cards closely and use them only when necessary.
That was Veatch's initial plan, but the convenience of credit purchases led her off-track.
Veatch first got her card three years ago, but had it only for emergencies. She got in a car wreck and used the card to pay her ticket. After that, she started using the card for other purchases and has done so for the past couple of years.
Last spring, Veatch charged a $500 digital camera and a $200 iPod. She said she spent money on a number of smaller things as well, including a trip to a Wichita mall where she spent $50. She had planned to pay
When Veatch quit her job with the Kansas Tumpike Authority in June, she was left without an income and had to use her card for every purchase.
these purchases off with her tax refund but ended up using that for something else.
While unemployed, she charged all daily living expenses like groceries, phone bills and gas, which added up quickly.
Ironically, Veatch now has a job at Pearson Government Solutions, a call center that advises students about loans and financial aid, and said she would make payments as soon as she could afford to.
Elizabeth Ault, Topeka senior, found herself in a situation similar to Veatch's.
Ault first got her Visa credit card to use abroad in Spain when she was 16.
"Everything was much more expensive there," Ault said.
It didn't become a problem for her until she entered college. When she went back to Spain to study abroad for the 2004-2005 school year, Ault ran up her credit card debt to about $3,000.
She spent money on food,
clothes and travel. Ault said students were in a particularly dangerous situation when it came to credit card use because they were not adequately prepared and they do not consider the consequences of spending.
"We're at a point in our lives where we just want to go out and have fun, and we don't want to worry about things." Ault said.
When college students charge food and drinks they can be disappointed down the road when they have nothing to show for their purchases, Baker said.
All they are left with is the bill.
Students are easy targets for credit card companies because many universities allow solicitation on campus. It's the first time away from home, and students are for the most part financially inexperienced when it comes to using credit cards.
Cards on campus
A U.S. Public Interest Research Group study found that students who obtain credit cards from companies soliciting on campus have higher unpaid balances than others.
According to PIRG, the aggressive marketing, combined with students' lack of financial experience and education, often leads to serious debt. In the survey of undergraduates by Nellie Mae, 56 percent of those with credit cards obtained them at age 18 and reported direct mail solicitation as the primary way of selecting the credit card company.
Nearly 300 colleges and universities have banned credit card solicitation on their campuses.
The University of Kansas still allows it but does not specifically contract with any company, according to Todd Cohen, associate director of University Relations.
In 2002, Student Senate petitioned to prohibit credit card solicitation on University property, citing credit cards as a major factor in student debt and arguing that credit card vendors had no part in the university's academic mission.
CONTINUED ON PAGE 3A
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