If your student has plans to travel in March, this is the perfect time to sit down with them and talk about how the trip will be financed, says Kevin OToole, education director at Consumer Credit Counseling Service. Its not uncommon, he says, for students to get larger-than-expected credit card statements in April.
Students need to develop a game plan, he says. They need to figure out how theyre going to finance the bankrollfood for a week, travel expenses, etc. Where will the money come from?
Oftentimes, he says, students have the best intentionsperhaps even planning a spring break budgetbut it is easy to rack up unintended debt on vacation. Three years ago, the nonprofit Consumer Credit Counseling Service began offering free credit counseling to students as part of a UI campus initiative called Paper or Plastic? Sensing more aggressive tactics by credit card issuers as well as an increase in the average student debt, several groups on campus met to discuss the issue and generate solutions.
Paper or Plastic? was the result. In addition to free counseling services, it offers educational programming to student groups as well as summer orientation sessions for parents. It is cosponsored by the Womens Resource and Action Center (WRAC), the Alumni Association, the Office of Student Financial Aid, Support Service Programs, University Counseling Service, the Office of Student Life, the Cashiers Office, Iowa State University Extension-Johnson County, and Consumer Credit Counseling Service.
We want to focus on preventive measures, such as raising awareness, says Monique DiCarlo, director of WRAC. We dont want to preach. We just want students to use credit wisely and to help them develop skills that will continue long after graduation.
From the cradle to the grave
Although credit card issuers have been aggressive for some time, OToole says that in recent years he has witnessed higher marketing intensity.
Solicitation is fierce, he says. Credit card issuers have saturated the market, and now lenders are competing with each other. Their offers are driven by perks like free t-shirts and candy. Lenders want to be the first credit card in your wallet, and college students represent a tremendous potential market to them.
Noting research that indicates consumers are loyal to their first credit card, OToole says lenders now are targeting high school seniors who are 18.
Samantha Houston, a UI senior from Van Meter, Iowa, got her first credit card in high school.
I thought that I would need one for college if I wanted to buy things over the phone or on-line, she says. I applied for it over the phoneI actually listened to a telemarketer, and he sold me on it.
Although Houston pays her balance in full each month, many students get into situations where they are not able to do so. In fact, according to an exit survey conducted earlier this year by the Office of Student Financial Aid, 104 out of 363 student respondents carried a total credit card balance of more than $2,000.
Growing credit card debt among college-aged adults has raised enough concern that U.S. Senator Christopher Dodd of Connecticut introduced legislation in September that would require greater responsibility on the part of companies issuing credit cards to students and youth under age 21.
Help is available
There is a distinct learning curve with credit cards, OToole says. If students havent figured them outtheir folks havent given them the Ps and Qscredit cards might seem like free money, and that can get them in trouble.
Students with specific questions about their finances should schedule an appointment with a counselor, he says, but those who want to develop general budgeting skills also are welcome. Counselorsoperating out of an office in the student union 10 months a yearteach students how to shop for the best interest rate, demonstrate interest accrual, explain the pitfalls of minimum payments, and emphasize the importance of paying bills on time.
Credit histories may be reviewed by potential employers, landlords, insurance agents, or even admissions offices at graduate schools, DiCarlo says.
Late payments may prevent someone from getting a mortgage or a car loan in the future, she says.
At last summers orientation, DiCarlo heard several parents say that they simply wouldnt let their students have credit cards. Thats unrealistic, she says.
You cant control whether your student has a credit card. Its easy for them to sign up for one without your knowledge. Applications are everywhere, she says. But you can help them learn how to use credit wisely and make sure they understand that credit card debt can affect their future.
DiCarlo emphasizes that many students learn money management skills from their parents. Houston is no exception.
My mom taught me not to count on someone else to keep track of my money, that I needed to know where it was atdown to the last cent, she says. I always balance my checkbook and double check the bank.
What parents can do
Parents should start by entering into a respectful conversation with their student and find out how he or she is doing financially, DiCarlo suggests.
One of the best things parents can do is talk about personal experiencetell their student about things they didnt know that led to bad decisions and how they dealt with them. So talk to them about your mistakes and how you fixed them, she says. And stay in the loop.
It also is important for parents to be familiar with campus resources and to be knowledgeable about everything from scholarships to budgeting.
Our goals are to educate students and get information to parents, OToole says. Parents can contact Consumer Credit Counseling Services directly and well send out literature. We feel we have an obligation to give parents and students the tools they need.
Credit cards, DiCarlo and OToole insist, do have an upside. They practically are essential in securing car rentals or hotel reservations. And they allow students an opportunity to learn financial management skills early in life.
Were not opposed to credit cards, OToole says. We just want students to use them wisely.
For information, call Consumer Credit Counseling Service at (319) 335-3239 or (800) 826-3574.
By Sara Epstein Moninger