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Debt mounts for college students |
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Thursday, 01 March 2007 |
Editor’s Note: This is the introduction to a three-part profile on Appalachian students dealing with debt.
by LILLIAN HOGAN
News Editor
If college students play their cards right, they won’t be paying for a slice of pizza years after they ate it.
In
the most recent assessment of student credit card use at Appalachian
State University conducted in March 2000 by Institutional Research
& Assessment Planning, 46 percent of 553 students surveyed said
they owned no credit cards.
A survey of 91 Appalachian students enrolled in Spring 2007 classes
conducted by The Appalachian found the trend to be consistent: 47
percent reported they own no credit cards.
The top reason students gave for not owning a credit card was they were “afraid of too much debt,” according to the IRAP report.
Crystal Glatz, a sophomore industrial design major, said she will wait until she graduates to get a credit card.
“I actually tried to sign up for one about six months ago and got rejected for having no credit,” she said.
The majority of Appalachian students surveyed by IRAP with credit
cards, 64 percent, reported they had credit card debt of less than $100.
But according to a USA Today study, national student loan debts and student credit card debts have risen from 2001 to 2006.
Scott Bilker, author of best-selling books on credit card debt and
creator of debtsmart.com, said this trend is a reflection of the
average consumer’s increased ability to borrow.
Bilker spent almost two decades hunting down great credit deals and saving thousands of dollars in debt for himself and others.
“Man is moved by inspiration or desperation. I would be the latter,” Bilker said.
In his last year of college, Bilker had to turn to credit cards to finish out the year.
“I couldn’t afford to pay crazy high-interest rates, so I used my
analytical skills to keep my rates as low as possible and save money,”
he said.
Dr. Jarrod Johnston, an assistant professor of finance, banking and
insurance, believes student credit card debt has increased over the
past years because of aggressive marketing, attractive consumer
products and a lack of experience when college students pay debts.
“Who doesn’t want the next iPod?” he said.
As far as student loan debts skyrocketing, Johnston said this is a
no-brainer because of the cost of education, which is rising at a rate
of “7 to 8 percent higher than inflation.”
“Nothing inflates more than tuition – it’s insane,” Bilker agreed.
However, Bilker and Johnston both believe credit card debt is more
plaguing to students than student loan debt because student loan
payments are not due until a student graduates.
“Out of sight, out of mind,” Bilker said.
On the other side of the spectrum, students are concerned with building credit.
Glatz, whose parents threatened to pull her out of college if she got a
credit card due to their anti-debt sentiments, said she is worried
about taking out a car loan without a credit score.
“If you’ve never had any debt, you’re not going to have a credit rating
or credit score. It’s going to limit your ability to get a mortgage,”
Johnston said.
For students interested in building credit without owning a credit
card, Johnston recommends asking to be added to a parent’s credit card.
“Essentially, you borrow their credit score,” he said.
Even though students would not have the physical card, their credit
would be established as if they owned the credit card – “just make sure
your parents don’t have late payments,” Johnston warned.
However, bad credit should be a student’s main concern.
Bilker said a credit report is like a “financial resumé.”
Employers, insurers, banks, landlords and mortgage companies will look at that credit, he said.
Other types of late bill payments, such as those for cell phones, are
also reported to credit agencies if there is some type of delinquency.
“But it won’t get recorded if you pay on time,” Johnston said.
As soon as a late payment is reported to credit agencies – 30 days after the payment is due
and still unpaid – an individual will probably have trouble getting credit elsewhere, he said.
Johnston, who teaches courses involving credit ratings, said it is
important to know the difference between a credit report and a credit
score.
A report includes all debt accounts a person has open, such as credit cards or student loans, but does not include assets.
A score is a rating from companies that employers can request, for
example, and is determined by analysts who review credit reports.
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