I owe U.: College students overwhelmed by mounting credit card debt

Jennifer Knight

Thursday, Aug. 16, 2001 | 11:07 a.m.

The purchases started out small -- a book here, a blouse there and some meals in between that. Like many college students, UNLV junior Rachel Loueras began building credit card debt before her career.

She, like others, is the new frontier in consumer credit card users: young adults still in school, in need of credit and potentially loyal customers.

"I was like, oh, I'll just start establishing credit. I won't use it," said Loueras, a 22-year-old special events major at UNLV who got her credit card from an on-campus kiosk about three years ago. "Now, I'm trying to pay it off slowly."

About 78 percent of undergraduates nationwide carry credit cards in their wallets, up from 67 percent two years ago. Average card debt has risen from $1,879 in 1998 to $2,748, according to a study done in 2000 by Nellie Mae, a student loan provider.

A more recent study done by the U.S. General Accounting Office in June showed the same trend. The study noted that the average student has at least one credit card with debt that ranged between $1,000 and $2,700.

That may not seem like a large amount by most standards, but consider that the average college student earns $560 to $600 a month, according to UNLV's Student Employment division.

Along with credit card debt, many students are also accruing student loan debt that comes due after graduation.

The combination of growing consumer credit card debt and student loans is causing some to finish college owing large amounts of money. About half of the students leaving school have an average of $19,400 in debt, the GAO study said.

Officials at seven of the 12 universities that were contacted said they believed some students were leaving school early because of mounting credit card debt, according to the report.

At UNLV the average student last year had about $12,085 in student loans, according to the college's Institutional Analysis and Planning division. It does not track other student debt.

"I don't even know how much I owe in student loans. I don't want to think about it," said Danae Cummings, a 20-year-old bio-ecology major at UNLV.

Aside from her student loan, she also owes $1,000 in credit card debt.

"When you consider I only make $7,000 a year, that's a lot," Cummings said.

The emotional price of high debt can be heavy for many adults. It cost University of Central Oklahoma student Mitzi Pool her life. In 1997, after losing her job, Pool committed suicide by hanging herself with a dorm room bed sheet. Police found her credit card bills strewn across her bed. She was in debt by more than $2,500.

A year later National Merit finalist Sean Moyer, of Norman, Okla., hanged himself in his family home after telling his mother he was in debt and confiding that he didn't see much of a future for himself. He was later found to have more than $10,000 in debt.

One of the reasons for the growing trend of debt among this segment of the population is access. More and more, students are bombarded with credit card offers on campus.

Several years ago, lenders required a co-signer for credit cards. With the saturation of the credit card market a few years ago, lenders made requirements less stringent, the Nellie Mae study said.

Stroll across most college campuses these days and you're likely to see kiosks advertising free gifts and pushing credit cards. If you don't see a table, then you might just find a credit card application slipped into bags at the student bookstore.

Critics have blamed aggressive marketing as part of the problem that students are signing up for the cards in the first place. Athletic departments, alumni associations or other campus groups are often the ones who benefit.

That's the case at UNLV. The alumni association has teamed up with MBNA, giving the credit company access to the alumni mailing list and allowing the firm to set up a kiosk on campus. In exchange, the association receives 1 percent of whatever students charge on any credit cards they sponsor.

"I'm betting that it's a pretty good return (for the credit card companies), because they're willing to come back," Alex Herzog, assistant director of alumni relations, said.

Credit card companies like MBNA market to 500 college campuses across the country and say that students are among their best customers.

"There is a lot of demand and a lot of need among students for credit cards," MBNA spokesperson Brian Dalphon said. "Our experience is that if you do it correctly, students won't have a problem."

Nationally the issue has sparked enough interest to spawn legislation in 24 states -- Nevada is not among them -- to place tighter control on credit card promotions on state campuses.

The risks for the companies might seem small. Bankruptcy rates for people 18 to 24 is small -- only 6.9 percent, compared with 29 percent of 25- to 34-year-olds, and 34 percent of 35- to 44-year-olds -- the GAO noted.

But the ease of credit could change that. The GAO report also noted that the growth of bankruptcy among those young adults was the highest of any other age group.

The GAO study also found that students were acquiring credit cards at younger ages.

David Parenti, an 18-year-old college applicant at the Community College of Southern Nevada, said he got into credit card trouble shortly after his 18th birthday.

"I got it just to buy stuff for my car. I went over the limit," Parenti said. " I cut it up. I knew as long as it was in my wallet I would use it."

One piece of encouraging news in the trend of students acquiring credit cards is that the majority of students are responsible with their debt. About 59 percent of students surveyed in just one part of the GAO study reported that they paid their monthly credit card bill in full.

"I use it for everything, car insurance, you name it," said Tina Gaumond, a math and psychology major at UNLV. "I look at it as a way to keep money in my account a month longer to gain interest."

"I'm not in debt because I pay the bills off as they come," said Caron O'Conner a 23-year-old finance major at CCSN.

The study attributed successful debt management in part to on-campus debt counseling.

Both CCSN and UNLV provide some student loan debt counseling, but when it comes to consumer debt, students say they don't need help.

A recent survey of UNLV students asked if they would like to have consumer debt counseling offered. Overwhelmingly, they said no.

"Students indicated they were empowered to make that kind of decision on their own," said Christopher Stevens, associate director for client services in student financial services at UNLV.

So far, credit card debt has not been brought up as a problem at UNLV, Stevens said. The student loan default rate is 6.7 percent, below the national average of 6.9 percent.

But in this gambling town where people can fold their hand and lose thousands, students seem to be holding their own and staying in control of their debt.