Attending College is the great time and achievement in life. However, by over using or poorly using the luxury of credit, it could be the most damaging.
As a freshman, I remember buying my books for the first time and in the bottom of the bag were about six credit card advertisements or applications. Thank you mom & dad for teaching me the credit card lesson before I went away to college. My conservative family life taught me well. I learned through example one does not go and buy something because of want. “Money is hard to come by and should be treated with respect” I remember my grandfather saying. It wasn’t until I was living on my own I realized the accuracy of his remarks. My parents were equally as thrifty providing the necessitates but keeping the luxuries special. I remember saying to myself as a youngster “I can’t wait until I am an adult and I can buy whatever I want.” I did. I paid the price but curbed the addiction before it got me.
Eight (80) percent of college students graduate with credit card debt, according to daveramsey.com. An undergraduate had an average debt of $2,700 per an internet article published by the Alabama Cooperative Extension System in 2002. This week, the average for a credit card rate per bankrate.com is 11.88%. The monthly minimum payment would be approximately $70.00 per month and take about 178 months to pay off. The minimum payment is based on 2.5% of the balance. Paying the minimum payment each month would result in about $1,700 in interest per bankrate.com.
Budgeting. Budgeting is the key. A new college student needs to be taught how to plan for their monthly expenses. Conversely, parents need to not fall victim of a student calling home and asking for more money. Parents also need to be firm and explain upfront the student is a responsible adult and will be held accountable for their actions – including credit card debt.
Credit Card companies have a product to sell to whoever will buy it. They sell money. This is the free enterprise system; Government agencies should not get involved. However, most colleges and universities have Freshman Orientation programs and a credit/budgeting class should definitely be a part of this process. High school programs have proved to be successful in curbing debt of young Americans.
Commuting students, ones who choose to live at home while going to school, are not off the hook. They need to learn the same responsibilities as their friends who are away at college. Parents should also give these students allowances, or have them help pay for the household expenses if the student is working. Staying at home to go to school can be reduce the cost of a student’s education but should not be used as a pass for financial responsibility.
Personally, I do not have a problem with a parent giving their college student a credit card. However, a contract needs to be created between the parent and the student. This document should cover when the card can be used and define an “emergency” as well as state the consequences if this contracted is violated. Running out of beer at a frat party does not qualify as a credit card emergency. A trip to the emergency room would be a qualifying use of the card. Parents need to examine charges as often as possible, not hard to do with the internet, when a charge appears, immediately call the student on it. The statement must come to the parent’s home.
The bottom line is the duty of teaching students the right’s and wrong’s of money and credit is up to us the parents. If a student Graduates college with no debt and has learned to be frugal and live on a budget, managing money in life will come natural.