Study: Many college students over their heads in debt
CONCORD, N.H.—Many college students in New Hampshire who already face the prospect of paying back thousands of dollars in school loans also are falling deep into credit card debt, according to a new study.
The New Hampshire Higher Education Assistance Foundation checked records of nearly 31,000 students and former students who borrowed from the organization and found many are relying heavily on credit cards, and falling behind in paying the bills.
"The delinquency shows that they really don't know the consequences of what happens when they don't pay their credit card bills," said research analyst Sarah Lowe. Consequences like lower credit ratings that could affect chances of renting an apartment, getting a job, getting another student loan or, after graduation, buying a home.
She said one reason the agency carried out the study was to get the word out that it's important for students to be taught about personal finances before reaching college.
"Teaching things to them once they get to college is almost too late," Lowe said. "Hopefully, the conversations have to start at home and at school early on."
According to the study, called "Clothed, Fed and Over Their Heads?" seniors with current loans are carrying average credit card debt of more than $3,300, a bill that would take 11 years to repay with minimum monthly payments.
Graduates repaying college loans are carrying average credit card debt of nearly $4,500.
But Lowe said what amazed her was that 21 percent of college freshmen in the study were at least 4 months behind on their credit card payments. And she said she was shocked to see that 42 percent of students had at least 6 open major credit cards, not including store-issued cards or gasoline cards.
"And you have to wonder why," Lowe said. "Are they intending to use for an emergency, pizza, spring break, or are they taking out the cards because they get a free T-shirt?"
The authors acknowledge the study raises some questions it cannot answer, such as are students filling in the gaps between rising tuition and financial aid with credit cards.
"We have no way of knowing if charges are going to tuition or books," said Lowe.
The study included 8,391 undergraduates and 22,186 former students repaying loans as of March 2007. The average former student graduated with $23,000 in student loans. All were New Hampshire residents when they applied.
The authors noted that students often do not have a steady income, or have low-paying jobs, so establishing a pattern of making even the minimum payments may not be a priority for students with little education in personal financial matters.
"I point to the whole subprime (mortgage) issue and just the lack of education," said Dan Hebert, president of the New Hampshire JumpStart Coalition, a volunteer group that advocates improving financial literacy for children in the state. "We are in a spending society and in my view, subprime came about, we've forgotten how to say 'no' and we've just found different ways to say 'yes.' "
Hebert said children need to be taught the differences between needs and wants, "but those are just words, because our society pushes us to spend money. Look at the tax rebate that's coming up. What are the words that they use? 'Don't save it, spend it.' It's a cultural thing that we have to turn around."
Overall, 46 percent of students and 55 percent of former students -- who might also be paying rent, car payments, family expenses and student loans -- were reported delinquent on credit card payments.
The authors said they hope the study prompts questions about whether colleges are monitoring credit card solicitations on campus and how schools and even organizations like theirs can prepare college-bound students financially.
The study dealt only with financial records. Lowe said the group is completing a survey in which former students offered comments on their financial situations.
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On the Net:
http://www.nhheaf.org/creditanalysis.asp
