November 15 2005
NEWSEmpty Wallet Syndrome
STUDENT DEBTAt the start of each semester, credit card companies flood college campuses with hopes of attracting new customers. The new customers are mostly under the age of 25.
A recent study conducted by the National Center of Education Statistics shows that 96 percent of college seniors have credit cards.
“Credit card companies to some extent, seek out college students. They are young and at times naive. A large amount of students are away from home while attending college and have a need for extra money. Also, there is potential for an income increase as well,” said Heather Garcia, credit card collection representative.
Credit card debt amongst college students is sky rocketing, leaving students with more debt than they can handle. As a result, some students have to work more and at times drop out of school to pay for the debt that they have accrued.
“I got my first credit card when I was 18 and immediately got into a lot of debt. I used my credit cards to pay for school to avoid student loans. Then I began to use it for luxuries. Before I knew it, I had to drop out of college because of money frustrations,” said Brian Guthrie, sophomore at MCC.
Credit cards are not the only unnecessary expense that drives young adults into debt. Often times, banks visit college campuses to encourage student to open accounts.
Many banks promise free checking accounts when opening a new account. Generally, students are not aware of the fees that can be associated with a checking account. Overdraft and annual membership fees can become quite costly. Most of the times the free checking accounts are for a limited time or have strict guidelines in order to remain free.
Cell phone companies strive to attract young adults. Most companies advertise a free cell phone if a 2-year contract is signed. The average plan will cost around $50 dollars a month. Often times there is a charge to later cancel the contract.
Fitness centers also use the method of contracts to get a long-term commitment from consumers. One month free or no signing up fee are used to entice students to join.
Almost unavoidable debts most students find themselves in are student loans. Most college students are forced to fund their college education themselves on interest-bearing loans rather than grants. Today, 18 to 24-year-olds are experiencing a dramatic increase in college cost and a low in grants. A survey of college borrowers conducted by Nellie Mae found that the average college senior graduated with $18,900 in student loans in 2002. Credit card debt among 18 to 24-year-olds has rose sharply over the past decade by 104 percent.
“I got my first credit card when I was 18-years-old, and now I have three. I needed new clothes my freshman year and exhausted all funds on school expenses. I thought I would be able to maintain the minimum payment,” said Devin Hicks, an ASU student.
Statistics show that the lower the income, the higher the debt. People are now expected to live outside their means. The Survey of Consumer Finances further explains that the average American spends 40 percent of their income on outstanding debt.
“Most young adults are aware of the terms of their contract. They do not understand the importance of credit,” explained Garcia.
Garcia further explains that many do not understand the difference between cash and credit purchases. If cash is withdrawn from a credit card it is at a much higher interest rate. In most cases cash withdrawals are at a 19 percent interest rate as a minimum.
“I use my credit card only for emergencies. I do not know the interest or the minimum payment because my father pays the bill,” Yee Fung, sophomore at MCC, said.
Volume 43, Issue 6. Today is
Photos by Amanda Smith
College students are finding themselves drowning in debt because of bills from overcharged credit cards, used cell phone minutes, textbooks for classes, and other necessities such as purchasing gasoline and daily food costs to survive the college lifestyle while always being on-the-go.