Is Your College Student Financially Prepared For Fall?

Take Charge America Offers Tips for Parents

Phoenix, Ariz. (TBD, 2005)…College campuses across the nation are hotspots for meeting new people, gaining valuable education and creating lifelong memories to be shared with future children and grandchildren. While the college experience can be a positive one, many students who are unprepared to deal with financial situations may find themselves in mounds of unwanted credit card debt. Will your child be financially prepared when he or she heads off for college this fall?

First -the good news. According to the latest study by Nellie Mae, released in June 2005, the average credit card debt held by undergraduate students was $2,169, the lowest average balance since 1998. The good news is that the majority of undergraduates are using credit cards to purchase school supplies, textbooks and food – necessities for college life. The percentage of undergraduates who started the school year with credit cards also decreased to 76 percent, down from 83 percent in 2001.

The bad news - while credit card usage and credit card debt among college students have decreased, the Partnership for Public Service says that the two greatest fears of college graduates are going into debt and being unemployed. College debt is a scary issue that confronts many students and unfortunately, the problem of how to finance college expense is universal among students.

Luckily, college students from across the country are taking action to spread financial literacy on campuses and prevent college debt before it starts. Jeff Clark is a student member of the Drury University Students in Free Enterprise (SIFE) team that recently participated in the 3rd annual Duel in the Desert, a collegiate personal finance case study competition at the University of Arizona in Tucson, Arizona.

“The biggest challenge for college students is just trying to keep their heads above water,” says Clark. “In addition to tuition costs, there are living expenses and if students don’t have help from their parents to cover these costs, they often end up putting them on credit cards and different forms of debt that have high interest rates.”

College students are continuously targeted by credit card companies, which provide students with easy access to opening new accounts. They provide promotional freebies and/or sale discounts to students on campuses, at sporting events and in shopping malls.

“Kids come to college and they see all these credit card opportunities in front of them,” says Cinnamon Bock, Cameron University SIFE member. “Students who don’t know how to deal with financial situations go crazy with the availability of credit cards because they never had any guidance from their parents as to what credit can do. The problem starts even before these people ever get to college, and parents need to teach their children from a young age, how credit can really ruin their lives if they don’t use it wisely.”

Some parents do teach their children about credit card debt before sending them to college. However, some students may accumulate thousands of dollars of debt and their parents may not even know about it. “A lot of students might be embarrassed to tell their parents that they’re in debt and so the parents have no idea how much debt they have actually racked up during their college careers,” says Brenna Myers, Purdue University SIFE member. “It’s an embarrassing thing to tell your parents especially if they taught you all your life how to manage your money and then you go to college and you come out with $3,000-$8,000 in debt.”

Mike Sullivan, director of education for Take Charge America, a national nonprofit consumer credit counseling company, says that parents should start early and talk with their children about the potential consequences of credit card debt. He provides the following financial tips for parents to help prepare their children for college:

• Open a checking and savings account – Review the terms and fine print of each with your teenager. Explain that fees can be incurred if the account is overdrawn.
• Send bills and statements to your home address – Monitor spending activities and cash withdrawals when statements arrive and teach teenagers how to balance their checkbooks. Balances shown on online bank accounts may not reflect that morning’s ATM withdrawal or checks that haven’t yet been cashed.
• Differentiate between debit and credit – Explain the differences and give teenagers a debit card for regular expenses rather than a credit card. Set any credit card limit at $1,000 to prevent over-spending and set realistic consequences if the limit is exceeded.
• Review monthly statements together – Focus on how much was spent rather than on how it was spent. If your student has a part-time job, compare the amount he or she makes with the amount he or she spends.
• Be a role model – Set a good example for teenagers and include them when making financial decisions. Inform them of the bills that need to be paid and daily costs that the family incurs. Suggest natural consequences if mistakes are made and keep the lines of communication open.

About Take Charge America
Founded in 1987, Take Charge America, Inc. (TCA) is a non-profit 501(c)(3) charitable organization headquartered in Phoenix, AZ. TCA is committed to helping consumers gain control of their finances and offers a variety of services including education, budget and financial counseling, and when necessary, debt management.

TCA also serves as an effective resource for the business community. We help financially distressed consumers re-organize their finances and return hundreds of millions of dollars annually to financial institutions, professional service providers, and businesses of all sizes and descriptions that may otherwise have been lost to the economy in bankruptcy. TCA’s diversified programs are utilized by tens of thousands of families and single men and women throughout the United States each year.