College students who graduate owing thousands on their credit cards are becoming a thing of the past, according to a new report by Student Monitor, and members of the banking community are looking to cash in on this increasingly debt-less demographic.
Despite a sluggish economy precipitated by lenders who gave home loans to people who couldn’t afford them, college students remain a prime target for credit card companies. Experts say college campuses are saturated with credit card offers to lure potential young cardholders.
A 2008 survey by the U.S. Public Interest Research Group found that 80 percent of students said they received direct mail from card companies.
Fourteen states have passed laws that prohibit or restrict on-campus marketing by card issuers. Still many colleges allow credit card solicitors to bombard campuses.
Recently, a subcommittee of the U.S. House Financial Services Committee held a hearing on the marketing tactics companies use to pitch credit cards to college students. In February, Rep. Carolyn Maloney, D-N.Y., chairwoman of the subcommittee, proposed legislation to regulate credit card practices that aid college students in amassing uncontrollable amounts of debt.
Subcommittee Chairwoman Maloney said in a written statement, “Students rely on credit cards to pay for everything from books to tuition. Unfair and deceptive credit card practices hit them especially hard and cause them to rack up late fees, high balances, and delinquencies. We can and should take steps to ensure that card companies aren’t unfairly targeting this vulnerable population. Responsible students deserve a fair shake – they shouldn’t have to graduate under a mountain of credit card debt.”
According to a 2004 study by Nellie Mae, 76 percent of undergraduates have credit cards and average undergraduate students have at least $2,200 in credit card debt. That figure jumps to $5,800 for graduate students. Moreover, student credit cards typically have high annual percentage rates, often at higher rates than the rest of the population given their lack of borrowing experience.
