Student debt is at an all-time high, according to a study by student loan corporation Sallie Mae, and the Credit CARD Act of 2009 will put restrictions on students’ ability to open new credit cards.
Beginning in February, students under the age of 21 will have more difficulty obtaining a credit card without a co-signer, and credit card companies will no longer be able to market on campus or at any near-campus events due to the new law.
“It’s unfair to expect students to be smarter about their debt than the general population,” said Lauren Asher, associate director of the Project on Student Debt, a nonprofit research organization for the Institute for College Access and Success. The institute works to make financial aid lending more equitable for students.
Project on Student Debt member Gretchen Wright said the public policy group works to make financing education easier for students so “the burden does not become untenable.”
Many students have credit card debt because tuition, books and fees are not the only costs associated with attending college, Asher said.
“You need to have a roof over your head and food to eat, and if you work all the time, you can’t go to class,” Asher said, explaining the need for credit cards to cover student living expenses.
The amount of freshmen who begin college with a credit card has risen from 23 percent to 39 percent since 2004, according to the study.
Undergraduates are also carrying record-high credit card balances, the average being $3,173, according to the study.
The implementation of the Credit Card Accountability, Responsibility and Disclosure (CARD) Act of 2009 will restrict credit card companies from marketing directly to college students or offering free merchandise in exchange for signing up for a credit card. Students under 21 who apply must either submit proof of income and financial history or require a co-signer.
“I think the Credit CARD Act is a good idea because incoming freshmen — people under the age of 21 — they may be adults but they don’t have any money management training or skills,” said Alan Bird, a graduate student at the College of Teacher Education and Leadership.
One way students can avoid credit card debt is to maximize the amount of federal loans they are able to take, Asher said.
About 64 percent of students who take out private school loans have not yet taken out the maximum amount of federal loans, which is $31,000, Asher said.
Using this money instead of credit cards or private student loans is a more viable option because there is a wide array of repayment options, including possible loan forgiveness, she said.
“I think there should be classes offered on how to manage your own personal finances and debt,” Bird said.
Lectures put on by the ASU Alumni Association as part of the Senior Year Experience program have focused on student financial stability, said Jennifer Holsman, executive director of the Alumni Association.
The association is planning additional seminars on the topic of money and debt management for the spring 2010 semester, she said.
