The dangerous game of credit card debt

Senior Jared Carson just wanted to go on spring break. And like many other students at IU and in schools across the nation, access to enough dough for a trip to somewhere warm was as easy as whipping out the good old plastic. \nCarson's is a Visa. Its current balance is sitting pretty around $3,000, a number that is often tripled by students before graduation. He got it, like so many other students do, from an offer mailed to him directly, pre-approved, for more money than possible for him to make as a full-time student. \nCollege students' credit card debt is a growing concern as the debt of many students upon graduation leads to a limited financial future, wrecked credit and a chain of minimum payments and bankruptcy that has left some students in financial peril -- even suicidal.\nRacking up the debt\nAccording to Mother Jones magazine, a student like Carson is small time compared to many other students who don't even understand the debt they are in. The article tells the tale of a National Merit Scholar, Sean Moyer, who as a student at Texas and Oklahoma accumulated around $12,000 in debt on 12 different credit cards. He was in risk of not fulfilling his dream of attending law school.\nFacing his financial failures, the 22-year-old Moyer hung himself in his closet.\nAccording to research in Time magazine, in the late 1990s, 10 percent of college students owed $8,000 or more to credit card companies. In the year 2002 that number is expected to jump to 12 percent and close to $10,000. \nWhile $10,000 might be an easy payment for a person with an established career, students often do not even earn the balance on their credit card in a full year, making the credit limits extended to them by some companies -- like Capitol One and Citibank -- excessive.\nAccording to an article in The Chicago Tribune, most students pay minimum payments that -- on a 19.9 percent interest credit card that's typical for students -- turn into five to six years of payments on interest alone. \nIt is very common, the article said, that students will have credit cards ranging from clothing stores to gas stations to general credit lenders -- all with limits that far exceed any projected income that the limit is supposed to be based on. \nAn article on Yahoo! Financial reports that credit card companies target students precisely because they rack up debt in exorbitant amounts, far past any means of payment that they could procure -- even with parental support. Most credit card lenders, the article reports, even make their approval standards lower so students who have already accumulated debt can get approved to begin the road to debt with them.\nThis road to debt is paved with not only major lenders like MBNA but also chains of retail stores that target students with their style and one-time 15 percent savings if a new account is opened.\nStudents have separate credit applications at any Limited Inc. store that make the credit check more lenient, extending gold and platinum cards to students with limits that can exceed $1,000 -- and that is just at one store. \nIU's Role\nAs the levels of debt continue to rise, legislators have started to question universities' roles in the marketing of credit cards to students. \nPat Smith, IU's assistant director of purchasing, said advertising for credit cards is illegal on the university campus. Yet step outside the office doors at the IDS and you are bombarded on the bulletin board with applications for Citibank's Student Platinum Select credit card. Go into any large lecture hall on campus and everyone from Sprint phone cards to Discover have postage-free applications that take less than five minutes to fill out.\n"Theoretically, advertising for credit cards on our campus is not permitted," Smith said. "However, it is up to the building managers to enforce it, and usually nothing is done."\nIn addition, Smith said the tables set up on campus with fake sunglasses and T-shirts with messages such as "Will work for sex" are also illegal.\n"If credit card vendors call the purchasing department, we will tell them they aren't allowed on campus," Smith said. "But none of them ever call. If we become aware of them we can have them removed or have IUPD remove them."\nSmith also said litigation against companies that set up on campus is too costly and too difficult. Often, he said, the people who distribute the applications are far removed from the actual credit card lenders, and it is just too hard to track them down.\nOn other campuses the role of the school varies. At IU, Smith denies the University receives any money at all from credit card companies.\n"As far as I am aware, the University absolutely does not receive any revenue from credit card companies," Smith said.\nSimilar sentiments were echoed from the Office of the Registrar, whose representatives said they do not sell the names of students to companies but that they are online and part of public record, which is how students are contacted.\nIn the two bookstores in Bloomington, both the University-owned IU Bookstore and T.I.S. include credit card inserts in their shopping bags. IU Bookstore Director Paul Hazel said the bookstore does include a Discover card application in its bags.\n"We include just the one credit card insert," Hazel said. "Because we include the insert we get the bags a little bit cheaper, but that is it."\nWhen asked if he would consider ending the inclusion of the inserts, Hazel said the bookstore has already done a lot to cut down on the marketing of credit card companies.\n"We used to have Visa and Mastercard come in and solicit students," Hazel said. "We also used to include a lot more inserts. We've really cut back."\nOn other campuses\nCutting back is not the case at many other universities. The University of Tennessee has a seven-year, $16.5 million deal with First USA, Mother Jones reports. The deal gives the company the names and addresses of employees, alumni and more than 40,000 students. Big Ten schools Michigan and Michigan State have similar deals with MBNA.\nStudents and alumni can get a First USA card with their university's mascot emblazoned on the front of it. And if they don't like their school colors or want to carry more than one card, they can get their sorority or fraternity letters and mascot as well. According to First USA's information center, the company offers cards to more than 250 schools, including Yale and Notre Dame, and it markets cards through various sororities and fraternities on the schools' campuses.\nThe University of Oklahoma gave First USA the exclusive right to market its Visa card to the school's web of alumni and students, according to Mother Jones. First USA is the only card allowed to set up tables at school athletic events, offering a Sooners card to approximately 80,000 fans a week during football season. \nThe involvement of IUSA\nAt IU, perhaps the most heavily marketed card is the MBNA IU Student Association Mastercard. A crimson card with a photograph of the Sample Gates has opening credit limits that can exceed $6,000.\nIUSA President Jake Oakman, whose organization sponsors the card, said IUSA uses the funds from MBNA for the GRIFF fund, an account that assists campus student groups.\nOakman said the funds collected from MBNA are necessary for the support of these groups, and the blame for student debt shouldn't be placed on IUSA.\n"Students have to be responsible for their own spending," Oakman said. "If they can't afford it, don't open up the card. It isn't up to IUSA to teach them how to be responsible."\n"The way I see it is, it is up to the students to manage their finances. If they can't do it, that is where the problem lies, not with us getting revenue from MBNA."\nWhat the future holds\nThe legislation that could limit credit card vendors from marketing to college students is only in its preliminary stages, and as of now, there seem to be no legal ramifications in sight.\nBut universities are taking steps to educate their students about debt. At several Atlantic Coast Conference schools, administrations are requiring a seminar on credit card debt for all in-coming freshmen. Rebecca Taylor of IU Orientation Programs said at IU, the orientation staff gives a clear message each year about credit card usage.\n"During the orientation welcome session, an orientation leader will take a credit card application out of the bags that the bookstore provides of stuff for freshmen," Taylor said. "And they will hold that application in the air and say 'This is what you do with this' and rip it in half."\nWhile there is no required seminar yet at IU, Taylor said the inclusion of information about how to stay debt-free could certainly become integrated into the orientation programs. \nAs for now, students can turn to a number of Web sites found through search engines for counseling for credit card debt. A free debt management Web site is http://www.debtfreetoday.com, a company that can be contacted by calling (800) 354-1781.