Students should avoid debt

By Thomas Oliver

The Atlanta Journal-Constitution

Incoming college freshmen beware: Credit card companies have until February to sign you up.

After that, the new credit card law goes into effect and parents will have to co-sign before students under 21 can have plastic in their own name.

"Students need to be careful this fall because of the very aggressive marketing" that is expected, says Suzanne Boas, president of the Consumer Credit Counseling Service of Greater Atlanta.

She's seen the damage done by too much credit card debt.

"It's so incredibly easy to overspend with credit cards," Boas said. "But what gets you in trouble is paying it off over time. And you can pay so little and still stay in the good graces" of the credit card company.

Too much debt is too easily acquired but so hard to get rid of.

It seems as though the sins of the parents are playing out in the lives and financial debt obligations of our children.

Sallie Mae, the nation's leading student loan provider, says students are carrying record-high credit card balances.

Like mommy and daddy.

The average student balance is $3,173.

They graduate owing $4,100. Twenty-percent of graduating seniors owe $7,000.

At an average interest rate of 13.5, it would take 10½ years paying $164 a month to repay $4,100.

Or 12 years at $280 a month, to repay the $7,000.

In leading our children into all the ways of debt and financial entanglement, we have now made student loan debts almost as traditional as Rush Week.

According to FinAid.org, the National Postsecondary Student Aid Study revealed that two-thirds of students graduate with an average student loan debt of $19,237. Twenty-five percent graduate owing $24,936.

And we're just talking undergraduate degrees. Post-graduate credentials can hit six figures before you can say the Hippocratic oath or habeas corpus.

Assuming a generous repayment interest rate of 7 percent over 10 years, your graduate will be paying $232 a month on the average debt. For the one in four with the larger debt, it'll cost them $290 a month.

Between credit cards and student loans, far too many of our children are on a road to serfdom, graduating with debts not usually associated with bright futures.

Check out what can't be that unusual of a situation: Graduate owes $4,100 on credit card and $20,000 in student loans. For about 10 years, that will blow a $400 a month hole in his or her budget. And that's before rent, food, utilities, gas, phone service, etc. etc.

Boas says students should have credit cards for emergencies. Not to subsidize their lifestyles. And they certainly shouldn't be carrying large balances on multiple cards.

No, they shouldn't do what their parents have done.

But it's not too late for parents to demonstrate some financial sense.

In addition to speaking to our youth about drugs and sex, we ought to speak frankly about debt.

We need to be honest and tell them of the lessons learned the hard way.

As with every generation, actions speak louder than words.

Thomas Oliver is a business columnist. He can be reached at toliver.writeright@gmail.com