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When it comes to paying for college, students are facing more and more debt:
• Nearly two-thirds of all four-year college graduates now have student loans.
• The number of students who graduate with over $25,000 in loan debt has tripled since the early 1990s.
Students struggle with debt
By David Ingram
Staff Writer
College is a time of many firsts for students. For most, it’s the first time living without parents, the first time to have a true sense of independence and the first time to make financial decisions. Because of their inexperience, college students are beginning to realize the true nature of credit card debt.
The terms are familiar: “pre-approved,” “interest free,” “percentage rate” and so on.
Somehow the definitions of these words have been lost in translation.
According to the Student Financial Services Web site, the average cost of a four-year Auburn education approaches $72,000 for residents of Alabama.
Out-of-state tuition has increased for the past decade. The average cost for an out-of-state student receiving a degree in four years is approximately $112,000.
Just as tuition has risen, so have the responsibilities of college students.
Nellie Mae is the nation’s largest student loan company. According to its Web site, the number of college students with a credit card has risen 24 percent since 1998.
Although the numbers of students with credit cards has increased, the number of students who pay the amount due has gone down, according to Nellie Mae. The average student credit card debt is nearly $1,000, which can easily become a problem for struggling students.
Some Auburn students have found themselves in credit card debt more than once with mom and dad not willing to pay the bill.
“You know, I don’t think you really realize what is happening until it happens,” said Lauren Woods, a senior in apparel merchandising.
“I thought you could keep paying the minimum payment, but I found out that will get you in the most trouble. The interest keeps rising and suddenly that $30 bar tab now really cost you $60.”
Woods said students should “get the facts” before applying for a credit card.
The most common acronym is APR (Annual Percentage Rate). This is the amount of interest a person will have to pay unless the card is paid in full upon arrival of the first bill.
For example, a card might have an APR of 10 percent, which means a bill of $100 would be $110 at the end of a calendar year if not paid.
College students sinking into debt
Average student credit card debt: $986
Average cost of four years of tuition: $72,000 at Auburn University
Increase in credit card use: Credit card use has increased 24 percent since 1998.
Information from student loan company Sallie Mae
That may not seem like a lot. But think about if multiple items are bought. If payments are ignored, the bill will rise and the person’s credit score will be ruined.
Corporations and businesses around the world will look at an applicant’s credit score before deciding to hire. If the credit score is bad, the likelihood of the job being offered is slim to none.
“I think that’s my biggest problem now is trying to rebuild my credit score, because I’m about to graduate and I have to get serious about my finances,” Woods said.
Many factors contribute to a credit score, but the most important is how consistently bills are paid.
However, having a good credit score and being accountable with a card can be rewarding. Companies will notice responsibility.
“I got a credit card my junior year, and I haven’t had any problems,” said Veronica Hollins, a senior in math. “That’s not to say I haven’t been tempted, but you can’t think it’s free money. It will come back to bite you.”
In summer 2007, the Tiger Club Card converted to an all descending option. The credit-card-like ascending account became a memory of the past.
“That is probably a good thing to happen to Auburn students,” said Mike Reynolds, director of student financial services.
“We would get to the end of the semester and students would still have balances.
“One thing that Auburn has done is made it harder for credit card companies to get on campus. Companies used to buy advertising space at Foy, but the University has done away with that.”
If students find themselves in credit card debt, they must take a series of steps to get out of it, Reynolds said.
These steps include not getting any deeper into debt (getting rid of the card), paying the minimum payment plus some, moving balances on cards with high interest rates to cards with lower interest rates and coming up with a written plan for reducing debt systematically.
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