More Students Overusing Credit Cards
Thu Sep 5,
By NANCY ZUCKERBROD, Associated Press Writer
WASHINGTON
(AP) - More college students are overusing credit cards, academics and policy
makers said Thursday as they urged Congress to do something about the problem.
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"Often
it's their unknowing parents who end up dealing with the debt," Ellen
Frishberg, director of student financial services at
Eighty-three
percent of undergraduates had at least one credit card last year, up from 67
percent in 1998, according to a study by Nellie Mae, a leading provider of
student loans. The proportion of students with four or more credit cards jumped
from 27 to 47 percent in that period, the study found.
The
Education Department recently found that more than 44 percent of college
students carried a balance on a credit card during the 1999-2000 school year. Among those students, the average credit card debt was
$3,066. It was the first year such data was collected.
Robert
Manning, an economic sociologist at the Rochester Institute of Technology,
testified that credit card companies were increasingly marketing to freshmen
rather than just juniors and seniors as in years past.
"It
means that the debt burden is going to show up earlier," Manning said.
"It means that retention in college is going to be affected, and we're
going to see an increase in dropout rates because a student that has a debt
problem in their sophomore year may not be able to find a way to financially
limp through the last two years."
He
said some of the nation's universities were contributing to the problem by
entering into financial contracts with credit card companies. For example, the
Sen.
Chris Dodd, D-Conn., pledged to order a General Accounting Office ( news
- web
sites) investigation into the marketing of credit cards on college
campuses. He also said he would pursue legislation to boost financial literacy
among students.
Dodd
also has authored legislation that would require credit card companies to
ensure students can pay their bills before getting credit cards. If students
cannot prove they can pay, they would be required to take a course in personal
finances or get their parents to co-sign an application.
Credit
card companies generally used to require parents to co-sign student
applications, but stopped that practice about a decade ago, according to
Manning.
Sen.
Phil Gramm ( news,
bio,
voting
record), R-Texas, is among the lawmakers who see no need for restricting
college students' access to credit cards.
"They
can be drafted. They can start a business. They can get married," Gramm
said. "I do think we have to be careful in a free society about how far
we're going to go in restricting people's rights."
___
On
the Net:
Senate
Banking Committee: http://banking.senate.gov/
Nellie
Mae: http://www.nelliemae.com
Education
Department: http://www.ed.gov/