College Students and Plastic Money:
Costs of Student Debt
During 1997-1998, two students committed suicide because of credit card debt. The problem of credit card debt and college students are increasing and has been discussed in mass media to draw people's attention to the negative social effects of college student credit card debt. Many students want to own a credit card because of a belief that they will get benefits to establish a credit card history which will help them get loans or any other credit in the future, and it is not difficult for them to get one. However, lack of financial knowledge causes students to get into debt easily because they do not “realize how quickly interest can compound or how important it is to read the fine print of credit card offers” (Hildebrandt). Casey Perkins, a college student, said from her experience, “I didn’t really understand how a credit card worked. I didn’t know that if I didn’t pay my entire bill at the end of each month I’d receive a finance charge” (61). Even though many students like to use credit cards for emergencies or necessities such as tuition fees or books and they think they can pay the debt off when they have a job, with credit cards, students tend to spend more (“The Danger of Credit Cards”); “the availability of credit cards has profoundly changed a typical student’s consumption patterns” (Manning, 170). Therefore, easily available credit cards for college students must be more strongly controlled because it causes serious destructive effects on students’ lives.
Robert D. Manning, a professor of business at Rochester Institute of Technology in the US, reports that the student credit card market began in the late 1980s. Faced with financial difficulties, credit card banks targeted college students. They considered college students “new groups of the financially desperate” (167), and they have been very successful. Not surprisingly, credit card issuers tend to target college students because college students are a “more profitable and strategically important market” and “it is cheaper to conduct mass marketing campaigns on college campuses …, [because] students forge long-term corporate loyalties” (167). Manning adds that since the mid-1970’s, the cost of college has increased dramatically, so students are likely to pay their education fees by credit cards (191). It is easy for college students to get a credit card because students “do not have to show an income source – they do not even have to have a job. They can just say they are getting money from their parents” (qtd. in Kienzle). Janne O’Donnell, mother of , one of the students who committed suicide, said that “how those companies can justify giving credit to a person making $5.15 an hour is beyond me…Credit must be based on the applicant’s present income – not on potential to earn” (qtd. in Manning, 160). Moreover, credit card companies lure students with free gifts such as t-shirts, hats or airline discounts and offer students low annual percentage and low interest rates of “5 to 7 percent” (“The Danger of Credit Cards”), but many students are not aware that the interest rate will increase “sometimes as high as 20% or even more for those how miss payments or receive cash advances” (“The Danger of Credit Cards”). Even though credit cards have caused college students massive debts, “students continue to acquire them” (“Spending Habits” 1). According to a survey by Student Monitor based on 1,200 randomly selected students from 100 universities around the United States, in 2002, 57% of undergraduates possessed credit cards and 39% of these students had a balance with an average debt of $5,776 (“Spending Habits” 1). A survey of Nellie Mae, a non-profit provider of parent and student education loan funds in the U.S, showed that 83% of students who had applied for financial assistance through Nellie Mae had at least one credit card with an average balance of $2,327 (“Spending Habits” 1).
