Tom is a graduate student at a Midwestern university completing a major research and writing project on student credit card debt. When Tom was in college, he built up $15,000 of credit card debt because he never learned how to use credit cards responsibly.
In some ways, Tom was fortunate. He didn’t suffer many of the consequences of getting into that kind of debt in college, such as losing out on a job, apartment, car loan or graduate school admission, because his parents bailed him out of his debt. His experience was not the only thing that motivated him to want to educate and help other young people; Tom’s friend committed suicide because of credit card debt.
I know you don’t want your child to have to deal with the emotional, academic and social stress of crushing credit card debt. So unless you want to set up a “bail my kid out of credit card debt” fund, it’s time to sit down with your future college students and make sure they have all the financial information they need to get through college as debt-free as possible.
Begin a conversation
You yourself may be carrying more debt than you would like, due to a more than 15-year home mortgage, more than a three-year car loan and credit card and store charge debt. But that doesn’t mean you can’t work with your children to make sure they know the financial rules of the road.
Even if you have a very high financial IQ and lead a completely or substantially debt-free life, you too must sit down with your children and share your knowledge. They won’t learn financial savviness from you by osmosis.
When your children go to college, they are going to get bombarded with credit card offers that will come with attractive free gifts, like college logo clothing and gadgets. They are going to be tempted to accept the offers and use the cards because:
- They may think having and using a credit card makes them
grown up and independent.
- They may mistakenly think that credit cards are free money,
more money or easy money—not debt.
- Their friends will get credit cards.
- They will be able to buy and do things they don’t otherwise
have the money for.
- They will want to keep up the lifestyle you provided them at
home or the lifestyle of some of their new wealthier friends.
- They think they can deal with any debt they build up later.
Prepare teens for temptation
Allison attended a Credit Abuse Resistance Education (CARE) Program presentation when she was a senior in high school and heard a story of how students at Penn State University football games were aggressively solicited to sign up for credit cards with offers of free stuff. She’s now a freshman there and recently told me that the solicitations at the football games and around campus were a hundred times worse than I had described them.
Far too many college students don’t understand the addictiveness of buying with plastic. For them, the temptation to sign up for and use credit cards irresponsibly is just too great.
Talk about the consequences
The problem won’t be just the excessive interest they will pay and the many fees, like overlimit and late payment fees of as much as $50. Students with credit card debt may be faced with the possibility of losing out on admission to graduate school, a job or an apartment.
Or, debt could contribute to them dropping out of school. Robert Manning, author of Credit Card Nation, estimates that seven to 10 percent of college students will drop out because of credit problems.
Students often find themselves in debt that they are too embarrassed to tell their parents about, and they can’t figure out how to pay it. They get jobs, work more hours, and their grades begin to suffer. That brings academic problems, too. Soon, it becomes too overwhelming.
Please make sure your teens are armed with all of the knowledge, lessons, tactics and techniques they will need to successfully avoid a financial meltdown in college!
To stay debt free, your teen must:
- Create a realistic budget so they know what they have to spend and won’t spend more than they have.
- Always have savings for an emergency. They shouldn’t rely on credit cards.
- Use cash, a debit card or a check as much as possible, so they will spend less.
- Pay cash for items under $10 or that they can eat or drink.
- If they do have a credit card, they should have only one, and only charge things they can pay for on time to avoid interest or fees.
- Stop charging if they find themselves in debt,
and pay off as much as possible every month.
Hon. John C. Ninfo is a Chief U.S. Bankruptcy Court judge. For more credit-related articles, budgeting tips and a handout on the real cost of credit, visit his Credit Abuse Resistance Education (CARE) Program Web site at www.careprogram.us.
Article reprinted with permission from Next Step Magazine.
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