Credit Card Debt Management

With an unstable job market and increasing college costs, it’s a hard time to be a college student. It’s no wonder credit card companies’ aggressive on-campus marketing campaigns appear so enticing to students. A U.S. PIRG survey of 1,500 students at 40 colleges in 14 states revealed the following:

-2/3 of college students have at least one credit card.

-55% use their credit card for daily expenses.

-Average balance for students with no parental help = $1,301

-Average balance for senior students = $2,623

Granted, student credit card debt is nothing compared to student loan debt. However, the credit card debt certainly won’t help pay off the student loan debt or establish financial stability after college. Furthermore, experts say accepting credit that is essentially unaffordable in the college years marks the beginning of a highly damaging pattern of behavior that contributed to the recent housing crisis.

Silicon Valley’s Mercury News cited 19-year-old Holly Jackson as saying she feels overwhelmed by her credit card bills and may need to pick up a second job.

“I’m learning my lesson,” she said. “After I pay these off, I don’t plan on getting more. They’re awful.”

Undeniably, credit card companies themselves are not without fault. Their aggressive and misleading on-campus marketing campaigns have been legendary. Sen. Robert Menendez (D-NJ) recently proposed a bill that would require consumers under age 21 to “opt in” before they could be the target of credit card solicitations. Additionally, universities are stepping in to provide personal finance education. These are certainly steps in the right direction.

We’ve discussed the Utah State University study that showed debt has a tremendous effect on the health of a marriage. Another interesting highlight from the study was the fact that couples with a high school degree only were more likely to bring debt into the marriage than couples with a college degree.

According to the Journal Extension publication of the study:

We found that 24% of husbands and wives in the study with a high school degree brought no debt into the marriage, whereas, 36% of husbands and wives who had at least a bachelor’s degree brought no debt into the marriage. …other research shows that, on average, college graduates earn more money than high school graduates. Therefore, college graduates may have been better able to pay down their debt prior to marriage, even if a portion of that debt was a result of paying for their college education. It may also be that college graduates, through their coursework, are provided with more opportunities to gain knowledge about finances and debt management than high school graduates who marry.

Is this fair? This is further proof that students need a better education on all things financial - especially credit cards - before they graduate high school! One might think couples with college degrees might be more likely to bring debt into the marriage because of student loans. However, this type of debt made up only 23 percent of all the different types of debt brought into marriage, ranking it third. The top two types of debt brought into marriages were automobiles and credit cards at 55 percent and 48 percent, respectively.

So here we have a study showing us that debt has a profound effect on marriage and more debt is brought into marriage by high school graduates. There has been a historic and persistent lack of instruction on all things financial (and particularly debt management) within the education system. And we wonder why the divorce rate is so high? Money fights are most common of all marital fights, according to the study! It is time for teachers and parents to stop shying away from money talk and instead make money management the new conversation topic du jour.

The use of credit cards has gone from 67% in 1998 to 75% presently. Students are falling victim to marketing schemes offering free t-shirts, free food, and many other gimmicks to collect credit card applications or even just permission to mail out credit card apps at a later date. An article by Baruch College in New York targets education as the primary reason for rising student credit card debt.

Today, far more college students are racking up debt than ever before. The primary reason is the education system, which in many cases does not provide sufficient or any resources for students to educate themselves on personal financial management.

It does seem that, aside from predatory lenders themselves, parents and educators are most at fault for the student debt crisis. And it is a crisis. One that has some students dropping out of college or committing suicide to escape their burdens of debt. It is shameful.

Yours truly was once a college freshman without a clue on anything financial, beyond how to write a check - and I was homeschooled! For skeptics out there, the homeschool education I received was very comprehensive. But for some reason, my parents omitted financial education altogether … and education on the Greek gods, for which I later chastised my mother while prepping for the Humanities mid-term exam sophomore year. But I digress.

My parents were not unique, but were actually the norm, unfortunately. Like many other naive college students, I ran off to college and got a credit card freshman year because it was being pitched by a popular kid, came with a free t-shirt and all my friends were doing it. What about credit card marketing practices, debt consolidation, interest rates, Universal Default Policy, credit limits, credit reports, FICO scores, the importance of paying all bills on time, and so on?

Is it possible that there is a lack of adequate financial education in high school because parents and teachers consider it irrelevant and want to discourage credit card usage at such a young age? There are some parents who allow their children some first-hand experience with the credit card game while still in high school, with limits and abundant supervision. This is necessary because there does seem to be a lack of education in the school system and ultimately, the buck stops with parents. If parents don’t educate their children, someone else will after they leave the nest - and it may not be the messages you want them to hear.