A recent report found more college students are using credit cards today than in 2004.
Eighty-four percent of undergraduate college students have at least one credit card, up from 76 percent in 2004, according to a report released this month by Sallie Mae.
One of the nation’s biggest student loan providers, Sallie Mae last conducted a similar survey on credit usage in 2004. Nine out of 10 students are using credit cards for educational expenses such as tuition and textbooks, and are charging double as much on their cards as in 2004.
The report was based on a random sample of 1,200 undergraduate alternative loan applicants taken in March 2008.
Patricia Nash Christel, a Sallie Mae spokesperson, said these increasing numbers are a worry for students‘ financial futures.
“Too many students are at risk of overpaying for college by pulling out credit cards to pay for textbooks or even part of their tuition bill, instead of using less expensive financial aid to cover these items,” Christel said in an e-mail interview. “Students and families need to build a comprehensive budget ahead of time to cover not only tuition, but also other necessities like supplies and travel costs that contribute to the overall cost of college.“
A survey of the students‘ credit histories found that only 17 percent of students regularly pay their monthly bill while 82 percent of respondents said they carry a balance and pay monthly fines.
“It’s not surprising, but it is unsettling that in this economy more college students are using credit cards more than ever before,” Christel said. “The top three reasons students gave for why they used credit cards to pay for education expenses were that they didn’t have enough savings or aid, cards were convenient and they underestimated the total cost of college.“
Students may be relying more and more on credit, but they may not know the implications of using credit cards. UC Davis‘ financial aid department has an entire section of its website devoted to money management. The financial aid office has also partnered with cashcourse.org, a website managed by the National Endowment for Financial Education that aims to help students with budget, credit, debt and other financial concerns.
UC Davis senior civil engineering major Daniel Rodriguez said he uses his one credit card often, but would consider having another if he had a job to make sure he had money to pay his bill.
“For the most part I am up in the air about [managing my credit card],” Rodriguez said. “If there were resources [about credit cards] I would want to see what strategies to use.“
Jana Sanders Perry, a representative from River City Bank, which has one branch in Davis and two in Woodland, said the bank doesn’t issue many credit cards to students, but is always willing to discuss money management issues.
“We have more personal involvement since we are a community bank,” Perry said. “Students can always come in and discuss [financial issues].“
As the Sallie Mae credit survey shows, students may need to start discussing credit, overspending, budgeting – especially when 39 percent of students come onto campus freshman year with a credit card already in hand. Christel advises using the “1-2-3 approach” when it comes to paying for college.
“First, look for financial aid that does not have to be repaid, like scholarships and grants. Second, explore low-cost federal student loans. Third, fill any gap with private education loans,” she said.
SASHA LEKACH can be reached at firstname.lastname@example.org.