Consumer Debt, College Students, and the Use of Credit Cards as a Means of Financing

Abstract

Consumer debt is on the rise; debt related to credit cards rose to $1 ,456 billion at the turn of the millennium. Today's problem, six years later, has only grown more dangerous. The problems begin with the credit card industry's shift in focus on lending and on its target for new customers. In 2005, over six billion applications were mailed to potential customers while less than one half of one percent of those applications were returned; less yet were approved to receive a credit card. The industry has been accused of shifting its focus away from traditional means and the "credit-worthy" cardholder. It continues to focus on a younger and younger customer. Young people, college students in particular, have not been independent for long enough, if at all, to have enough experience managing money, dealing with finances, or using credit. Nellie Mae, the federal student lending agency, estimates that in 2004, 76% of all undergraduate students began their college career already holding a credit card while the average outstanding card balance was well over $2,000. Despite a recent fall in the rate of credit cards among students, the debate about a trend still continues with regards to its increase or leveling off and potential decrease. Programs to teach students about financial concepts exist but they are so few in number and reach that they do not appear to be making much difference