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##  Credit Card Usage and Debt among College and University Students.               ERIC Digest.                                                                 

Since the late 1990s, lawmakers, college officials, consumer                    advocacy groups, and higher education practitioners, have become                increasingly concerned about the rising use of credit cards among               college students.  A recent study has shown that both the number of             students owning a credit card as well as the amount of credit card              debt held by students has risen in the last couple of years (Nellie             Mae, 2000).  Since eighteen year-olds in most states are eligible               for a card without parental consent or employment, many have been               concerned that students will use credit unwisely because of their               financial inexperience and suffer the long-term consequences of                 carrying high debt (U.S. General Accounting Office, 2001, June, p.              1). NELLIE MAE AND TERI/IHEP SURVEYSIn 1998, The Education                Resources Institute (TERI) and The Institute for Higher Education               Policy (IHEP) conducted a survey about credit card usage among                  college students by using a stratified random sampling method.  The             majority of the students surveyed were undergraduates.  This report             found that almost two-thirds of the students owned at least one                 credit card and one in five of those students had four or more                  credit cards (The Education Resources Institute, 1998, June, p. 9).             The majority of students (82%) surveyed reported an average balance             of $1,000 or less (The Education Resources Institute, 1998, June, p.            11). In 2000, Nellie Mae, a prominent lender of educational loans,              examined credit card ownership among undergraduate and graduate                 students who were applying for credit-based loans with Nellie Mae.              Their survey found that 78% of undergraduates (aged 18-25) have at              least one credit card. Ninety-five percent of the graduate students             surveyed had at least one card. Undergraduates carried an average               balance of $2,748 while graduate students carried an average balance            of $4,776.  Nellie Mae also found that of the 78% of undergraduates             with a card; 32% have four or more cards; 13% have credit card debt             between $3000-$7000; and 9% have credit card debt greater                       than $7,000 (Nellie Mae, 2000). THE ADVANTAGES AND RISKS OF CREDIT            CARD OWNERSHIP AMONG STUIDENTSA study conducted by the U.S.                 General Accounting Office in 2001 found that most college                       administrators viewed credit card usage by students as something                positive.  (U.S. General Accounting Office, 2001, June, p. 2) They              cited the advantages of using a credit card for establishing credit,            medical or family-related emergencies, making travel arrangements               and reservations, payment conveniences such as shopping by telephone            and the Internet, and cash less transactions (U.S. General                      Accounting Office, 2001, June, pp. 3, 9). Indeed, the TERI/IHEP                 report showed that 77% of students used their credit card for                   routine personal expenses and 67% of students used it for occasional            or emergency expenses (The Education Resources Institute, 1998,                 June, p. 10). The survey also reported that most students used their            credit cards responsibly.  Many students, 59%, pay off their                    balances right away.  Of the 41% who carry a balance, 81% pay more              than the minimum balance due every month (The Education Resources               Institute, 1998, June, p. 11). 
However, the disadvantages of                  owning a credit card can outweigh the advantages, especially for                students who have student loans and credit card debt and/or students            that charge tuition and fees.  The TERI/IHEP survey showed that many            students are using their credit cards to pay for education-related              expenses such as tuition and fees (12%) and books and                           supplies (57%).  (The Education Resources Institute, 1998, June, p.             10). One in five respondents charged tuition and fees at some time;             of these students, 57% paid the balance immediately, and 43% carried            over the balance (The Education Resources Institute, 1998, June, p.             12). 
The TERI/IHEP survey found a connection between student loan             debt and the ownership of credit cards - 33% of the respondents                 reported having at least one credit card and student loans (The                 Education Resources Institute, 1998, June, p. 17).  Loan recipients             were also more likely to carry over credit card balance than                    non-recipients (The Education Resources Institute, 1998, June, p.               17).  The U.S. General Accounting Office survey reports that the                average undergraduate student loan debt upon graduation                         is $19,400 (U.S. General Accounting Office, 2001, June, p. 3).                  Students who have not adequately planned for their financial future             may be unable to handle payments for credit cards, student loans,               and living expenses after college. Excessive debt and inability to              pay can lead to damaging credit reports that can inhibit future                 plans such as buying a car or renting an apartment.  A poor credit              record or high debt can impede a student's chance of finding a job              after graduation or result in higher rates for car loans or                     mortgages. (The State of Iowa, 2000)  In extreme cases, high debt               levels could lead to personal bankruptcy (U.S. General Accounting               Office, 2001, June, p.14). 
Besides financial considerations, there            are academic and psychological risks associated with students                   accumulating high debt.  According to Iowa Attorney General Tom                 Miller, an increasing number of students are accumulating high                  credit card debt with serious long-term consequences (The State of              Iowa, 2000).  One of those consequences, according to an Indiana                University administrator, is an increase in student dropouts due to             unmanageable credit card debt (The State of Iowa, 2000).  Mr. Miller            also argues that excessive debt can lead to psychological problems              such as stress, and in extreme cases even suicide.  Highly                      publicized cases of students who committed suicide apparently due to            the anxiety related to their unmanageable credit card debt have                 forced lawmakers, consumer groups, and colleges to take a closer                look at this issue. (See Hoover, 2001; Loyal, 2002). CREDIT CARD              SOLICITATION ON CAMPUSCredit card solicitation on college and               university campuses is a common occurrence.  The TERI/IHEP study                found that 24% of students applied for a card through a campus                  representative or advertisement.  Students also reported applying               through the mail (37%) or at a business (36%) (The Education                    Resources Institute, 1998, June, p. 30). 
Some campuses restrict               solicitation in some way while state laws mandate other college                 solicitation policies (U.S. General Accounting Office, 2001, June,              pp. 25-26).  Meanwhile, numerous colleges and universities form                 multi-million dollar partnerships with credit issuers, which                    encourages students to apply for credit.  (see Hoover, 2001; Loyal,             2002; Pinto, Parente & Palmer, 2001). 
Officials and students have             complained that issuers do not significantly inform students about              important credit terms such as available interest rates or penalties            that are written in disclosure statements.  In response, some                   colleges require credit card issuers to hand out additional                     materials about credit terms to students.  (U.S. General Accounting             Office, 2001, June, p. 28). COLLEGE POLICIES THAT PREVENT STUDENT             DIFFICULTIES WITH CREDIT CARDSWilliam Stanford, the director of             financial aid at Lehigh University recommends that campuses inform              students as soon as possible about how to use credit responsibly.               Additionally, he advises campuses to control solicitations, curtail             bookstore promotions, establish a working relationship with the                 nearest Consumer Credit Counseling Services office (call                        800-388-2227 for the nearest location), offer workshops during                  freshman orientation, provide information via the campus website,               communicate with senior class members, inform residence hall                    counselors, and discourage the use of credit cards for making                   tuition payments (Stanford, 1999, pp. 15-17). STATE LAWS LIMITING               CREDIT CARD SOLICITATION AT HIGHER EDUCATION INSTITUTIONS 
Between             1999 and May 2001, at least 24 states enacted legislation to either             study the effects of credit cards on college students or to limit               credit card solicitation at higher education institutions.                      Legislators were influenced by parents of college students, student             groups, and by negative media portrayals of credit card solicitation            on campuses.  (U.S. General Accounting Office, 2001, June, p. 53).              For a complete list of this state legislation, see Appendix II of               the U.S. General Accounting Office's report, "Consumer Finance:                 College Students and Credit Cards" (U.S. General Accounting Office,             2001, June, pp. 53-66). REFERENCESThe Education Resources                 Institute, The Institute for Higher Education Policy (1998, June).              Credit Risk or Credit Worthy? College Students and Credit Cards.  A             National Survey.  ED 421 069 
Hoover, E. (2001, June 15).  The Lure            of Easy Credit Leaves More Students Struggling with Debt [Electronic            version].  The Chronicle of Higher Education, pp. A35-A36.  EJ 629              655 
Hoover, E. (2002, January 23).  ACLU Asks Nevada College to               Stop Selling Student Data to Credit-Card Companies [Electronic                  version].  The Chronicle of Higher Education. 
Loyal, T. (2002,                March/April).  Don't Leave College Without It.  Mother Jones.                   Retrieved April 23, 2002 from                                                   http://www.motherjones.com/magazine/MA02/creditcards.html 
Nellie              Mae (2002).  Credit Card Usage Continues among College Students.                Retrieved April 16, 2002 from the Nellie Mae web site:                          http://www.nelliemae.com/library/cc_use.html 
Pinto, M.B., Parente,            D.H., & Palmer, T.S. (2001, January/February). College Student                  Performance and Credit Card Usage.  Journal of College Student                  Development, pp. 49-58.  EJ 624 498 
Stanford, W.E. (1999,                     March/April).  Dealing with Student Credit Card Debt.  About Campus,            pp. 12-17.  EJ 600 836 
The State of Iowa, Attorney General's                  Office (2000).  Iowa Attorney General Consumer Advisories.  Credit              Cards on Student Income: Proceed with Caution - and Shop with Care!             Retrieved April 18, 2002 from the State of Iowa official web site:              http://                                                                         www.state.ia.us/government/ag/consumer/advisories/student_creditcard            .html 
U.S. General Accounting Office (2001, June).  Consumer                  Finance: College Students and Credit Cards.   Retrieved April 16,               2002 from the U.S. General Accounting Office web site:                          http://www.gao.gov/new.items/d01773.pdf ED 454 785 
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The                mission of the ERIC system is to improve American education by                  increasing and facilitating the use of educational research and                 information to effect good practice in the activities of learning,              teaching, educational decision making, and research, wherever and               whenever these activities take place. 
This publication was                    partially prepared with funding from the Office of Educational                  Research and Improvement, U.S. Department of Education, under                   contract no. RR-93-00-0036. The opinions expressed here do not                  necessarily reflect the positions or policies of OERI or the                    department.  Permission is granted to copy and distribute this                  ERIC-HE Digest.                                                              **Title:** Credit Card Usage and Debt among College and University Students.               ERIC Digest.                                                                 **Note:** Contains small print.                                                        **Document Type:** Information Analyses---ERIC Information Analysis Products (IAPs) (071); Information Analyses---ERIC Digests (Selected) in Full Text (073); **Available From:** ERIC Clearinghouse on Higher Education, Institute for Education                 Policy Studies, Graduate School of Education and Human Development,             One Dupont Circle, Suite 630, Washington, DC 20036-1183. Tel:                   800-956-7739 (Toll Free); e-mail: [email protected]. For full                 text: http://www.eriche.org/digests/2002-1.pdf.                              **Descriptors:**  College Students,  Credit Cards, Credit (Finance),                              Debt (Financial), Higher Education, School Responsibility, Student             Responsibility                                                               **Identifiers:** ERIC Digests                                                                 
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