With college tuition prices skyrocketing and student loan debt at an all time high, students must be hyper vigilant to avoid piling credit card debt onto their list of creditors.
News for the graduating class of 2015 is not optimistic. The Wall Street Journal's Real Time Economics cited that the class of 2015 will carry the most debt in the history of new classes entering the workforce. Today.com referred to statistics from Edvisor reporting:
The average new graduate has more than $35,000 in student loan debt
Approximately 71% of students who graduate with a bachelors degree will also have a student loan
Statistics from 2013, found that college graduates also had $3,000 in credit-card debt
Part of the issue is that many students are getting a credit card for the first time while in college--away from their parent’s watchful eye. In 2013, Higher One interviewed students, uncovering that 20% of college students have bought things they can’t afford and 24% believe that their friends or family members would be shocked by their spending habits.
Advice from the experts is to talk about finances with your child during the middle school years, which could include obtaining a credit card for your high school junior to establish credit and learn how to harness debt while the student still lives under your roof.
Dena Noe, vice president of marketing and communications at the University of Nebraska Federal Credit Union ($84 million, Lincoln, NE) says her team takes special care to counsel new student credit card holders on the do’s and don’ts of credit.
“Students should have credit cards that have a low limit, usually starting at $500,” Noe begins. “It is important for students to establish good credit early, so we recommend they get a credit card while they are in college. We counsel them to start by using the credit card for just one kind of purchase, such as using it for gas purchases, for example.”
She says lenders recommend the student pay the credit card off every month and once the student establishes this habit and has been able to manage their finances for six months to a year, then the lender recommends adding additional repetitive purchase to their credit card. The student can start using the card to buy groceries for example.
“In addition to counseling new student credit card holders on the do’s and don’ts of credit we also educate them on budgeting and recommend using free online budgeting tools,” Noe says. “We also recommend they set up e-alerts on their accounts to let them know when they’ve made a purchase and also to alert them of low account balances.”
“Finally we talk to our new student card holders about credit bureaus and credit scores,” she adds. “We educate them on how the credit score works and how it can affect their future. Credit scores can affect not only the interest rate on a loan today, but future employment, insurance and rent costs. Being responsible from the start is important for the student’s future.”
Rather than waiting for students to come to them, some credit unions have initiated outreach efforts in a medium students know and understand--social media on the road.
For Suncoast Credit Union ($6.6 billion, Naples, FL), using social media to reach students has been extremely effective. “We are active on social media and in our mobile unit that we just unveiled, where we will teach students about credit, credit scores and how to avoid credit card debt,” says Camille York, youth outreach specialist for Suncoast Credit Union.
“One way we are making sure students know how to avoid debt of any kind, including credit card debt, is through the financial literacy being emphasized in our new mobile unit, which will be on HCC campuses twice a week to give students the financial tools and knowledge that they need to make informed decisions about their money. Suncoast also partners with Florida Southwestern State College and delivers financial education to all incoming freshman, which includes modules about credit and credit scores.”
“We offer a Rewards Student Classic Visa for students attending a two- or four-year accredited college or university in order to help them establish a good credit score at an early age,” York says. “Favorable features include a $500 credit limit, low interest rate, and no hidden or punitive fees if the student misses or is late with their payment. Students also appreciate the contributions made to the community through the Suncoast Credit Union Foundation, which gives two cents back to the communities we serve every time the credit card is swiped. Suncoast is dedicated to helping students and young adults learn how to manage their money so they can save more for life.”
The University of Nebraska Federal Credit Union only offers one credit card with a low interest rate, so students don’t receive a special card. “We do however make sure to flag the credit card as a student so that it will not receive automatic credit line increases,” Noe says. “We believe students should only have a credit line of $500. We encourage students to set up one-on-one mentoring at the UNL Student Money Management Center. During this session, students will learn about budgeting and how to access other financial education. We have free online budgeting software that parents and students can review together. We present seminars open to students called Money 101 and Credit Bureaus/Credit Scores. We present these seminars at our location as well as on campus.”By Gina Ragusa