Credit Card Debt Among College Students

(This is a guest article by Clark Chambers*)

College students are increasingly relying on student credit cards to make ends meet. According to student lending giant Sallie Mae (SLM), average credit card debts carried by graduating college seniors jumped $1,200 between 2004 and 2008. The same study also shows that only a shocking 15% of college students do not carry any credit cards.

The number of credit card-toting college students should change however now that the “Credit Card Holders’ Bill of Rights” act was signed into law. The bill requires credit card companies to lay off the high-pressure pitches to college students unless the students have proof of independent income or complete a financial literacy course. Otherwise, the credit card companies need Mom and Dad's consent to market credit cards to college-age students until they reach the age of 21. So, what does the passing of this new bill mean for students? No more stacks of credit card offers piled up in their mailboxes right after their eighteenth birthday, shucks!

The provisions in the "Credit Card Holders' Bill of Rights” act also outline new protections for college students in the form of credit line limits and requirements that card issuers may ask for. Card companies must receive proof of income and credit history, or a co-signer before issuing a card to borrowers still in college.

Reasons for the card increase amongst college students

According to some research analysts, college students make easy targets because they have little independent income and a significant need for ready cash, and Mom or Dad will often step in if a college student gets into trouble with a credit card. But, the main issues right now are the lack of college financial aid and personal savings, combined with skyrocketing college costs create the perfect storm for college students to go looking for additional funds.

Another cause for student’s increasing their needs of credit cards is the lack of private student loan funding available for school. Do to the current credit crisis and the changes the Government made to the student loan industry, students are finding it more and more difficult to find private student loans. So, the next best thing students are turning to is student credit cards to pay for living expenses, books, fees, supplies, and in some cases, college tuition itself. Often, with the constant hounding of the credit card companies on and off campus, students eventually find themselves holding on to four credit cards, complete with balances, by the time they graduate school.

Ways to avoid a credit card disaster

  • Only buy what you can afford. May sound like common sense, but this is where a lot of people get into trouble. That new Macbook Pro or HDTV you’d never have the cash to pay for may seem like a good idea when you’ve got plastic. If you are unable to afford to pay with cash or a check, don’t charge it.

  • Do not replace student loans for credit cards. Federal college loans have low, fixed interest rates, as well as borrower benefits that will allow you to postpone making your payments if you’re ever experiencing a financial hardship. This is something credit card companies will not keep in mind. Take advantage of your federal aid, scholarships and private student loan options first to cover all your school expenses before turning to credit cards.

  • Get digital. Most major card companies offer automatic e-mail or text alerts that can notify you about your current balance and payment due dates. If you’re prone to forgetting payment dates, use these alerts. It will make remembering those bills so much easier and save you money.

  • Pay off that balance. Don’t settle into the habit of paying only the minimum due, pay off the entire card balance each month to prevent years of payments.

  • Put it on ice. If all else fails, stick those credit cards in a large bowl, fill it with water, and stick it in the freezer. The next time you’re tempted with an impulse buy you’ll be giving yourself time to think. Thawing or breaking apart that block of ice will give you the needed time to collect your thoughts and really think about that purchase you are about to make.

*About the author: This guest post was provided by Clark Chambers, a freelance writer who covers topics on college finances including; financial aid, private student loans, student credit cards, and debt consolidation.

*Image Credit: Photograph by Andrman [via Flickr Creative Commons]

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Janie Out of Debt said...

I put my credit cards on ice and that helped me. It helped to delay gratification or at least slow the buying process down.

I think the problem with credit cards is due to the fact that they give a false sense of security and it is like play money.

Nice post.

Best wishes,


Tim said...

Debt is not a very fun way to experience burden at such a young age- yet so easy with all of the commercialism that surrounds us.

Also, there are workable ways to enhance income- especially with technology at our fingertips.

Just recently, I ran across one such new idea that shows a way to create some significant income by tapping into the cell phone market using the Internet. It's fascinating just reading about this.

Kevin Cafferty said...

My college credit card had a very low balance - it was a good way to get my financial feet wet without miring me in tremendous debt (well, tremendous debt that didn't involve student loans)

Samson Smith said...

According to me don't spend money which you can't afford is the perfect way to avoid cc debt. This post will surely help many people who are having great amount of debt.

FindCollegeCards said...

Great post. I'm on the side of having colleges have some sort of financial class. It seems like we can praise, and praise, but students still tend to break the rules when it comes to managing money. What can you do?