With the growing prominence of credit cards, the starving
student has gone from having handy money to debtor’s
prison.
A 2001 study by Nellie Mae, a national student loan provider,
found that 83 percent of college students had credit cards, and
average credit debts of $2,327.
The study also found that during one’s college career, the
average student will double his or her credit debt, and triple his
or her credit card collection.
“Sometimes students will maximize a credit card, and then
take out another credit card to offset that debt ““ it becomes
a vicious cycle,” said Ronald Johnson, director of the UCLA
Financial Aid Office.
Failure to pay in full the minimum monthly payment on a credit
card can result in increased interest rates, penalty fees and a
buildup of interest.
Despite these risks, the number of credit cards students own has
continued to rise, reaching an average of 4.25 cards per student in
2001, which could increase the danger of compounded debts,
especially for students who may not have steady incomes.
Credit debt is a dire problem for university students. Debt
buildup has forced many students to scale back their academic
endeavors in order to work, or has even led them to drop out of
school entirely.
However, according to Nellie Mae’s 2001 report on
undergraduate students and credit cards, average student credit
card debt decreased 15 percent from 2000 to 2001 as schools have
recognized the need to educate students about debt management and
financial planning.
At UCLA, the Financial Aid Office offers workshops to help
student stay out of debt.
The workshops try to dissuade students from getting more than
one credit card, and encourage them to be realistic about their
budgets.
“If they can’t pay off their credit card on a
monthly basis, they shouldn’t have it,” Johnson
said.
This year, the Financial Aid Office is planning to bring in
speakers from banking institutions to speak to students about the
consequences of burdening themselves with extra credit. The office
is also considering a similar program for entering students and
their parents.
UCLA’s loan services office also offers a number of
resources to help students stay out of or deal with debt.
The Loan Services Office has a calendar on its Web site which is
intended to help students plan their year financially. The calender
is meant to help increase student awareness of how and when to
apply for grants, scholarships and other “free money”
in order to avoid borrowing.
The office also has a “how-to” series ““ which
can be found in the Loan Services Office, or on their Web site
““which addresses 10-12 different issues such as how to find
student loans, how to avoid paperwork mistakes, and how to obtain
an e-loan.
“We are developing workshops to deal with money
management, including credit card debt,” said Raymond Parris,
loan services coordinator for the Loan Services Office.
“We give (the students) wise ways to borrow money, such as
paying as they go, during school. One of the main concepts is to
stay out of long-term debt,” he said.
Parris described the e-loan plan as a way any UCLA student can
get interest-free short-term loans. E-loans are due a month after
they are taken out, so a student can pay other bills and pay the
loan back through their BAR account instead of accruing debt on a
credit card.