Credit card usage and credit debt among college undergraduate students has increased substantially, according to a recent study by Nellie Mae, a subsidiary of Sallie Mae, the nation’s largest provider of education funding. The study analyzed student credit card behavior in 2000, comparing the behavior to data from a similar study conducted in 1998.
“The statistics are a cause for concern,” said Cornell University professor Barbara Bristow, policy analysis and management.
“It is clear that the proliferation of credit cards on college campuses is widening, causing some concern for parents and educators,” Nina Prikazsky, vice president of Nellie Mae operations, said in a press release.
The study showed an increase in student credit card usage from 67 percent in 1998 to 78 percent in 2000. The percentage of students with four or more credit cards also rose from 27 percent to 32 percent in the same time period.
The study also found an increase in average student credit card debt from $1,879 to $2,748. Nearly one in four students with credit card debt owes more than $3,000, and nearly 10 percent of students owe more than $7,000.
“Adopting a habit of carrying credit card debt is expensive,” Bristow said.
In response to these statistics, some universities, like University of California-Berkeley, are adding credit education classes to their required curricula, according to Russel Gentile of StudentCredit.com.
“In past years, [StudentCredit.com] has worked with a number of schools, including Duke, Clemson and Cornell universities, to distribute over 100,000 free credit education brochures to incoming freshmen,” Gentile said.
Some universities across the country have started noticing the problem and limit credit card sales pitches to students by banning table marketers, Gentile said.
Cornell, however, allows credit card companies to solicit students on campus, according to Linda Grace-Kobas, director of the Cornell News Service.
“The major credit card companies (Visa, American Express, Discover, Mastercard) come to the Campus Store throughout the year to market their products,” she said.
“In my experience with students both at high school and college levels, many do not truly understand how expensive credit can be,” Bristow said. “When students learn how credit cards work and understand the math, their credit use behavior usually changes dramatically.”
Bristow suggested students abide by three rules of responsible credit card use.
“Know how credit works and what it costs,” she said. “Read the statements and credit agreement thoroughly and be sure you understand what you have signed. This is a contractual agreement, and you are obligated to repay your debts.”
Bristow also recommended students pay as much as possible each month and pay bills on time.
“Each monthly payment is about two to three percent of the unpaid balance,” she said. “Interest for students is typically high. Informally looking at student credit offers here at Cornell, I have found offers ranging from 19 to 25 percent interest.
“If the student makes a late payment, this will be added to the balance due and increase the amount due by as much as $25 or $30 for each late payment. This amount will then also begin to accrue interest.”
Finally, Bristow strongly urges students not to borrow more than they will be able to repay.
“Be willing to live within your means. Say no to the temptation to experience temporary pleasures now,” she said. “Realize the cost of postponing payment for those pleasures until the future.”
She advised students to “learn how to find satisfying, less expensive substitutes.”
Cornell students appear already to be heeding Bristow’s advice.
“I don’t have a credit card, only a debit card,” said Aaron Shapiro ’04. “The temptation to spend money that you don’t have with a credit card is too great.”
Adam Caslow ’05 agreed.
“What has been most useful is a debit card. I can buy things like it’s a credit card, but I don’t have to worry about purchasing things I won’t be able to pay for,” he said.
