No credit card debt at graduation: Priceless

| News Editor

Owning at least one credit card has become the norm on college campuses. Nevertheless, credit card ignorance continues to exist at universities throughout the nation.

Credit card companies have historically targeted the college-age population.

“Credit cards are extremely useful for younger people,” business professor Glenn MacDonald said. “They solve a problem younger people have.”

(Illustration by Zoe Scharf | Student Life)

(Illustration by Zoe Scharf | Student Life)

Among these problems are access to liquid currency and a desire to develop a positive credit history for the future.

“Credit cards are useful to young people for a couple of reasons,” MacDonald said. “You’re at that part in your life where you are earning less than you will earn at any other time. Your money comes in at irregular times. Credit cards help alleviate these issues.”

In an effort to further tap the college student market, credit card companies have resorted to offering T-shirts, water bottles, food and other items in exchange for students filling out a credit card application.

Research has found these tactics to be successful. One study showed that in a sample of 1,500 students, two out of three students were enticed to sign up for a credit card after receiving free merchandise.

Last year, the United States Public Interest Research Group spearheaded the “Truth About Credit” campaign to educate college students about credit cards.

The campaign found that many of the offers given to college students have one thing in common: enticing low to zero preliminary interest rates that quickly rise to as much as 24 percent once the trial period ends.

In addition, another study found that more than half of college students in the United States signed up for at least four cards and accumulated an average of $2,500 in credit card debt by the time they graduated.

Despite news stories all over the nation highlighting credit card ignorance on the part of college students, students at Washington University seem to be responsible credit card holders.

“Students do not seem to have trouble managing their credit,” said Bill Witbrodt, director of Student Financial Services.

Student sentiment is similarly positive.

“I would say [the student body’s financial knowledge] is probably above average for a group of people of the same age range,” sophomore Dan Flaherty said.

Since most credit cards offered to students have very low credit limits, most students do not accumulate a great deal of debt.

“There’s no way to acquire significant debt,” MacDonald said. “Abusing credit cards boils down to a few thousand dollars worth of debt.”

In response to recent studies and widespread anger over predatory practices conducted by credit cards companies, Congress passed a law in May to protect young cardholders. The law requires applicants 21 and younger to have a co-signer on any new credit card account unless they can show that they “have an independent means of repaying.”

In addition, unsolicited pre-screened card offers will be prohibited. Credit cards companies will also be prevented from issuing any free items to apply for a card if the approach takes place on or near a college campus.

Since credit card companies enjoy extending credit cards to students, the enaction of the law presents a challenge.

“The banks could seek repeal, but I doubt they will,” said Michael Greenfield, professor in the School of Law. “Several of the provisions will be implemented further by regulation of the Federal Reserve Board and the banks no doubt will attempt to influence how those regulations are worded. But this is tinkering at the edges, not negating the requirements of the statute.”

Another provision of the bill encourages universities to provide credit card counseling to students during their orientation programs.

Such programs are a part of Orientation at the University, according to Witbrodt.

“As part of freshman orientation, we provide information to incoming freshmen about credit cards and what the risks are,” he said.

Witbrodt said the University has educated students about credit card use before.

“In the past, we had a program called, ‘What’s My Score?’” Witbrodt said, “and the purpose of the program was to acquaint students with the credit score concept and the fact that the credit score can be just as important a number as a student’s GPA.”

Such programs have been successful in the past.

“We surveyed students prior to the program to get some sense of their knowledge of credit scores, and then we surveyed them after the program to see if their knowledge base had increased with regard to credit scores, and we learned that the knowledge base did increase,” Witbrodt said. “We also learned that while many of our students have credit cards, that on the whole they didn’t seem to be having a problem associated with the credit cards.”

The new law goes into effect in February 2010, but many say the bill will not have a big impact on the University.

“We don’t like them [credit card companies distributing on campus], and we discourage them from having a presence on campus,” Witbrodt said. “The law is intended to help students and protect them from credit card predators, but since our students appear to have no significant problems with their credit cards, I just think this initiative will help continue credit card responsibility.”

Despite the enactment of the new law, many believe that credit card companies will still be able to access college students.

“They [credit card companies] won’t do anything they can’t do,” MacDonald said. “They’ll advertise near college campuses and where college students go to buy textbooks.”

Greenfield responded similarly.

“I don’t know what they [credit card companies] might do, but I never underestimate the ingenuity of the banking industry to evade the consumer protection provisions of state and federal law,” Greenfield said..

Sign up for the email edition

Stay up to date with everything happening at Washington University and beyond.

Subscribe