SPRING 1999
Volume 42, Number 3

IN THIS ISSUE

At Iowa, Those Who CAN Teach

Four Year Grad Plan

Half the World Away from Home

In This Office, Students Come First

Pass the Plastic

Tax Deductions

Summer School?

Creating the Level Playing Field

Expanding E-Mail Network

Parent Times Briefs

Calendar

They're young, attractive, smiling people sitting at desks in the Iowa Memorial Union, and they'll give an undergraduate an application for a credit card with a bag of M&Ms as a "gift."

The financial institution they represent frequently will give the student a credit card on the strength of his or her social security number. The student has no job, no credit history, no income-but a Visa or MasterCard, just in time for fall football weekends or spring break.

Pretty soon, the student is looking at a bill with hundreds of dollars of debt owed to the financial institution. Gone are the smiling faces, the easy credit-and the student's credit rating, for at least seven years.

"The Campus Credit Card Trap," a survey undertaken by the Public Interest Research Group in spring 1998, indicated that:

· Students who obtained cards at campus tables had more cards (2.6) than those who did not get them that way (2.1). Forty-two percent of them carried unpaid balances, compared with 36 percent of those who didn't get their cards at campus tables.

· Students reported obtaining gifts ranging from T-shirts and Frisbees to coffee mugs, slinkees, and candy or soda for filling out an application.

· Thirty-eight percent of students who said they were responsible for their own cards said they paid off the balance each month. Thirty-six percent said they paid "as much as they can," while more than a quarter of the total surveyed reported they paid minimum only or paid late.

The University of Iowa will not admit credit card companies to solicit applications in the Iowa Memorial Union unless a campus group sponsors the company, says Sandra Kugel, who schedules exhibit tables in the IMU. But credit card companies often pay flat fees or per-application payments to campus groups to sponsor them, the PIRG survey noted. Under current policies, the University will not forbid a company to hand out applications if it does have a sponsor, Kugel says.

The U.S. Department of Education estimates that the amount of money borrowed by students increased by 11 percent in 1997, totaling more than $38 billion. With credit card debt on top of borrowing for student loans, an average student might graduate with $20,000 of debt.

If you're apprehensive about your student carrying credit card debt, there are a couple of things you can do:

· Make sure your student knows that he or she is responsible for any debt incurred on a new card.

· Send your student information about the problems of credit card debt.

Here is a summary from several sources:

· Before applying, study the risks and benefits. If you believe you need a card and can handle it responsibly, resolve to apply for only one card. It's all you need. If you pay it off on time, you can build a good credit record.

· Remember that credit card companies may turn down your application. If they do, you lose more than just a potential card. The rejection goes onto your credit history and it will affect any future chances of being able to obtain credit.

· If you must carry a balance, pay as much as you can each month. Never pay only the minimum balance. Why? If you incur a $1,000 debt at 18 percent annual percentage rate (APR) and you make only the 3 percent minimum payment, it will take six years to pay it off. You will have spent far more than $1,000 in the process.

· If you do get a credit card, use it only for emergencies. Don't use it as a substitute for income.

· Pay monthly expenses by cash or check. It's too easy to postpone the pain by paying with a credit card.

It's easy to buy more than you can easily afford if you pay with a credit card.