Most college students enter the real world with a sense of accomplishment -- and a load of debt.
By RON MATUS
Published August 3, 2004
A few years ago, Jeff Billy was majoring in management information systems at the University of South Florida. Job prospects looked good, so Billy, now 27, did what came naturally.
He borrowed and borrowed and borrowed some more.
With five credit cards, Billy paid tuition, gussied up his Acura Integra and bought the latest monitors and motherboards for his computers.
The result: A financial hole $26,000 deep.
Billy's story isn't unique.
College students are as mired in credit card debt as ever, despite a flurry of action by campus administrators and lawmakers since the late 1990s.
The average undergraduate finished school with more than $3,000 in credit card debt in 2001, according to the most recent figures from Nellie Mae, a leading source of student loans. That's on top of student loans, which now average $20,000 for a four-year graduate.
For graduate students, the situation is worse: Nellie Mae reports the average graduate student carried $7,800 in credit card debt in 2003 -- up 64 percent from 2000.
There are hardship stories, with students resorting to credit cards to pay rising tuition. But there are plenty of tales of excess, too. Credit cards are just too easy to get, financial counselors say. And college students just can't get enough.
Sushi? Cool.
Spring break in Cancun? No problem.
"It's like trying to halt the AIDS epidemic," said Ellie Iversen, a counselor with Consumer Credit Counseling Service of Central Florida and Florida Gulf Coast, a nonprofit group with a branch at the USF Credit Union.
Many colleges boot credit card solicitors off campus, and others require classes that teach the basics of personal finances.
"We've made a proactive stance to educate our students," said Perry Crowell, assistant vice president for administrative services at Florida State University.
But too often, the efforts of administrators are half-hearted and hypocritical, said Robert Manning, a professor and special assistant to the provost at the Rochester Institute of Technology in New York.
Manning, author of Credit Card Nation, estimates one in five college students has more than $10,000 in credit card debt, much of it hidden because student loans covered the bill.
Meanwhile, colleges are signing multimillion-dollar deals with credit card companies that give colleges a share of the profits.
"It's smoke and mirrors," Manning said.
* * *
Students are prime targets for credit card companies.
They spend money. Someday they'll make money. And because many already have loans, they figure a little more debt won't matter.
To be sure, millions of students use credit cards responsibly.
Catherine Pulley, a spokeswoman for the American Bankers Association, cited a 2002 study that found college students on average do better than the population at large in paying their monthly credit card bills in full.
"They are actually more responsible," Pulley said.
But those who aren't face special pitfalls.
Persistent debt means more work to pay bills, more pressure to quit school and less time to study, critics say. A University of Minnesota study found that as credit card bills increased, grade point averages dipped and students were more likely to drop classes.
In the long term, debt-ridden former students will find it tougher to secure car loans and mortgages. Tens of thousands every year will declare bankruptcy, which might seem like a convenient fix at the time but can dog their financial reputations for years.
Over two years, Jeff Billy, the recent USF grad, pared his debt to $4,000. But getting there required a ban on new gadgets and an extended stay at his parents' house.
It also meant that when he and his girlfriend bought a home, they had to jump through more bureaucratic hoops because of Billy's credit history and got a less favorable interest rate on the mortgage.
* * *
Lawmakers are feeling students' pain.
Since 1999, legislators in at least 29 states have filed bills involving credit cards and college students. Many faced stiff industry resistance.
In New York a few years ago, one bill proposed banning credit cards to anyone younger than 21 without parental approval. In Kentucky this year, a bill sought to ban free gifts from marketers unless accompanied by educational brochures. Neither bill passed.
In Florida, state officials have left credit card issues to colleges.
Several have banned credit card companies from soliciting on campus. What used to be a common sight -- credit card representatives at booths in student unions, hawking T-shirts and key chains to sweeten contracts -- is scarcer, although students say the scene still plays out at USF despite official restrictions.
A few Florida colleges, including Florida International University in Miami, now require classes that touch on personal finances. Outside the state, some colleges have even set up counseling centers to deal specifically with credit card debt.
FSU addresses debt management during freshmen orientation. Last year, it mailed a campus-produced video, Avoiding the Credit Card Monster, to 22,000 high schools.
The video tries to prepare students for the onslaught of credit card solicitations and to make them respect the hole-digging powers of high interest rates. One student tells viewers that some of his peers are so devastated by credit card debt, "they're, like, eating Ramen (noodles) eight times a day."
Manning, author of Credit Card Nation, isn't convinced such messages make a strong enough impression. He said many colleges have financial incentives to pull their punches.
FSU and the University of Central Florida in Orlando are among the Florida schools that contract with credit card companies.
Both have deals with MBNA that makes the credit card giant the sole provider and solicitor of cards emblazoned with the universities' logos. Administrators say such deals limit excessive marketing.
In return, the schools get a small cut from every purchase made with the cards.
The FSU deal, signed in 2002, guarantees the university $10.7-million over seven years, officials there said. UCF gets about $200,000 a year, with a small percentage of that set aside for scholarships, said Tom Messina, executive director of UCF's Alumni Association.
Messina said he doesn't see a conflict.
"We don't encourage debt," he said.
* * *
Not everyone sees students as victims.
When Iversen at the USF Credit Union was in college, she remembers having a mattress on the floor and using orange crates for end tables.
Today's students? No way.
"They want everything now," Iversen said.
Billy, the recent grad, said he was so hooked on plastic that when a financial counselor cut up his cards, it felt "like getting stabbed."
But college students haven't cornered the market on instant gratification.
The average debt among credit card holders in the United States is $13,000, according to one estimate. And last year, a record-setting 1.6-million people sought bankruptcy protection.
Americans in general "live well beyond their means," said Sarah Roberts, spokeswoman for the Center for the New American Dream, an organization devoted to responsible consumption.
Some students exercise restraint.
Leonard Stone, who graduated from USF in May, said his parents taught him to pay his credit card bills in full at the end of every month.
"I don't like paying 20 percent of my money to someone else," he said.
Others are undeterred.
To hear Terra Virgin describe it, credit cards bring freedom.
"I just maxed one out yesterday," said Virgin, 19, a USF sophomore returning to her Tampa apartment recently from a clothes shopping trip.
Virgin's parents gave her two credit cards for textbooks, but she uses them for new clothes, groceries and food runs to Sonic and Steak n Shake. She said her parents fuss but still pay the balance.
"They say, "I don't have the money for your petty charges,' " she said.
"But I see something I like, I want it."
Times researcher Kitty Bennett contributed to this report. Ron Matus can be reached at 727 893-8873 or matus@sptimes.comSticker Shock
Even in Florida - where tuition is among the lowest in the nation - college is an expensive proposition. Below is the estimated annual cost for a typical University of South Florida undergraduate:
