What interest rate do you pay on your credit card? If you know, then I have a follow-up question: At what age is someone expected to know that?

While credit cards are an extremely powerful spending tool, consumers, especially college students, may be irresponsible with their credit, carry high balances, and pay only the minimum amount on their cards. Colleges, parents, and public policy makers must work together to drive down student consumer debt.

In recent years, college students have become a target for credit card companies, which can be problematic for these young adults. According to the Journal of Consumer Affairs, it is estimated that 91% of college seniors have at least one credit card and 56% carry four or more cards. Furthermore, according to some studies including the Consumer Federation of America, the average college student will graduate with more than $2,800 in credit card debt and up to one-fifth carry a credit card debt of $10,000 or more.

With financial literacy and transparency gaining such importance, how can the universities not take responsibility to teach this to their students? Parents should lay the foundation, but this should be reinforced in college, especially for students who were not privileged to learn this at home.

Multiple causes for student debt

After researching some academic business journals, I came to the poignant realization that there is certainly a lack of adequate financial education during the fundamental college years, especially in terms of understanding the credit system, which can have devastating effects, both on the students’ financial and personal lives, but also for the economy they stand to inherit.

College students are the best hope for our economy’s possible success, and the difficulties they’ll incur if sunk into debt by greedy credit card companies can become quite overwhelming if preventive steps aren’t taken.

College students specifically have a broad range of options of getting into debt trouble, especially geared toward funding their education.

According to a 2009 study by Sallie Mae, “nearly one-third (30 percent) [of college students] put tuition on their credit card, an increase from 24 percent in 2004, when the study was last conducted. In total, 92 percent of undergraduate credit cardholders charged textbooks, school supplies, or other direct education expenses, up from 85 percent in the previous study. Students who used credit cards to pay for direct education expenses estimated charging $2,200, more than double 2004’s average of $942.”

If the balance is not paid in full, the most likely scenario, this is essentially an 18 percent loan.

Read: 8 Costs to Cut When Sending Your Child to College

Some of these students, among others, may get into debt assuming they will easily get out of debt once they graduate. However, it is clear that this belief that debt can easily and quickly be repaid is erroneous. Current college students have been immersed in a credit card culture, but don’t fully understand credit, sometimes even equating it to earnings. Oftentimes students don’t even know what interest rate they are paying.

The role of the university

Many online guides on saving money in college encourage students to ditch the credit cards. While that can definitely keep you out of trouble, it will not teach you how to manage credit and become part of the general credit card using world. College is a place of learning, and financial management should be taught with programs or workshops offered on campus.

Colleges can develop programs or update existing high school programs. A logical and convenient time would be along with freshman orientation, when wide-eyed teens enter college and spend a fortune. Ideally, programming should continue throughout the school year and be for all students.

This is not ridiculous; in February, ten Canadian colleges organized financial literacy workshops across the country.

Colleges must be more proactive in giving back to the students in terms of credit cards. If a college can accept money to allow credit card reps to come onto campus, which is pretty much commonplace for most huge campuses, at least some of that money should be used to educate the very students they are indirectly selling the cards to!

It’s a vicious cycle: card reps sell cards to unwary students, professors perform studies on ensuing student debt, and the universities clean up all the way through. Schools should utilize this information and join with organizations like Visa and the FTC to help educate students on how to properly manage their finances, especially their credit.

If colleges can take money from credit card companies to allow credit card solicitors on campus who offer incentives, such as t-shirts or mugs, to apply for cards, and waiving requirements like previous credit history, then shouldn’t they also offer unbiased advice to these students on what to look for in a card?

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  • Aaron

    great article zack. plus you got a pic of yourself. green is a good color