Bridge is published by the Boston University Office of University Relations.
offers cautionary tips to plastic-carrying peers
Each fall, as predictably as geese fly south, credit card marketers flock
to city sidewalks and peddle plastic to unwary college students. The sales
pitch, luring prospective customers with free T-shirts, Frisbees, and
phone cards just for signing up, can be irresistible. It's also inescapable:
credit card offers appear in everything from Internet pop-up ads to magazine
Critics of the industry say the advertising blitz has worked all too well.
Today the average college undergraduate holds four credit cards, and the
media has reported an increasing number of students dropping out of school
when their debts get out of hand.
Fortunately there is no rash of bankruptcies here, according to Boston
University administrators. But students may not realize the long-term
risks that debts can pose to their financial health. Many don't know,
for instance, that a poor credit history can affect the ability to secure
a loan for graduate school, finance the purchase of a new car, rent an
apartment, or even get a job.
This semester a College of Communication senior is helping her fellow
students become better money managers through a MasterCard peer education
program called Are You Credit Wise? Jessica Morganoff (COM'02), who is
serving as an instructor in the program as part of a public relations
internship, counsels students individually and in workshops. Recently
she made a presentation to a small group of undergraduates at BU's annual
"The biggest thing that surprises the students I talk to," she
says, "is that every time they sign up and get the free T-shirt,
they really are applying for a credit card, and the spending limit on
that card goes on their credit report. And then when they apply for a
loan, they don't understand why they're not getting approved. That's the
real issue, not that college students are in severe debt, but that they
are opening up all these accounts without realizing it."
Lenders, she explains, fear that a student with an excessive number of
cards has the potential to rack up unmanageable debt loads and is consequently
a poor risk for any new type of borrowing. This perception may exist even
if the student currently has a zero credit balance.
Morganoff reminds students that over time, they can lose large sums of
money in interest charges. She describes the consequences of a $1,000
purchase paid off long-term at 19 percent, a rate typical of what students
are charged. Making the minimum monthly payment of $15, she says, it would
take eight years to pay off the purchase -- and add $843 to the original
"Developing good money-management habits early will benefit students
well beyond graduation," Morganoff says. She adds that her workshops
"are geared to people who are already being somewhat responsible,
not people who are in severe debt, because most college students are not
National statistics, however, show that student debt is on the rise. According
to a survey conducted by the Nellie Mae Corporation, one of the country's
largest providers of government-supported student loans, 78 percent of
students carried charge cards in 2000, as compared with 67 percent in
a 1998 survey. During those two years the average debt for student cardholders
increased from $1,879 to $2,748.
A substantial 9 percent of the cardholders in 2000 carried debts of more
"One of our concerns as a student loan provider is whether this additional
burden students take on will affect their ability to pay off their loans
once they get out of school," says Marie O'Malley, marketing vice
president for Nellie Mae. "It's a little early to tell."
Student loan default statistics have dropped every year since the early
1990s, she adds, but that could soon change.
"With the shift in the economy this year, it's a little bit scary
for us to think that students will still continue to take on the same
level of government loans and then add all this credit-card debt on top
of that," O'Malley says. "Some of them are having problems finding
jobs for the first time in about eight years. We don't know how that's
going to affect their overall consumer behavior and their ability to manage
their debts, specifically their student loan payments.
"While most college students are fairly responsible," O'Malley
adds, "we are concerned about that 9 percent who have balances over
$7,000. We have to educate them or help them manage their spending behavior
while they're in school."
BU cautions freshmen about the hazards of credit card solicitations each
year at orientation. The message comes with a dose of humor, courtesy
of the Wellness Center's educational comedy troupe, the PEN (Peer Education
Network) Players. In a two-minute sketch, representatives of a bank and
a credit card company set up shop on a busy city street and urge passersby
to stop and fill out a form, offering complimentary CD cases, T-shirts,
and pens. They tempt potential customers with free checking accounts and
cards with low introductory interest rates. Every so often a bell rings
and a narrator steps in to offer consumer caveats.
"Food, gas, and regular expenses should be paid for with cash,"
he says at one point. "Who wants to finance a gallon of milk for
Another source of consumer education for students is the University's
Office of Financial Assistance. Before students receive loans through
the University, they are required to attend a counseling session informing
them of their rights and responsibilities.
"We talk about credit cards and warn them about how accumulating
too much debt can jeopardize their future," says Barbara Tornow,
executive director at the aid office. "Many students don't realize
that there are actually professional and medical schools that won't admit
them if they have debt problems, because they know these students have
compromised their ability to obtain student loans.
"My concern, too, is that students are borrowing on credit cards
when they could use much better sources of credit through subsidized loans
with a special student rate," she adds. "Credit cards are a
more convenient way to pay for things, but very often not the best way."
In addition to counseling sessions, Tornow's office provides information
for aid recipients on the Internet. She is considering adding links to
the Web site that will focus on the prudent use of credit cards. "I
think students need to be better informed," she says.
Meanwhile, BU has banned credit card merchants from campus buildings,
according to Herb Ross, associate vice president and associate dean of
students. But vendors persist in their sidewalk campaigns.
"We try to monitor the real-time, in-your-face solicitations,"
Ross says. "We've been doing our best to keep them under control."