In just a few weeks, millions of young Americans will be heading back to college. For many students, college can be a rewarding experience. But for most parents, sending a child or children to college can be a tremendous financial burden. With education costs rising and the economy still reeling from the worst recession since the 1930s, many families are looking for ways to cut back on spending.
To avoid incurring too many unwanted expenses, financial experts are advising parents not to give their college-bound children credit cards. Instead, young consumers must learn to be financially responsible before being given credit. Specialists say that college freshmen have to be aware of the responsibilities that come along with owning plastic. Having the right knowledge and practicing wise spending can go a long way in teaching college students about discipline and proper financial practices.
Some credit analysts are alarmed by recent findings released by different research bodies and institutes about credit debt by college students. A recently conducted study by the College Board found out that Americans who graduated from public colleges and universities last year each owed $17,700 in credit card debt. Consumers coming from private universities and colleges, on the other hand, owed an average of $22,375 each to card companies. Sallie Mae, one of the largest issuers of credit to students, pointed out that the average college freshmen owed $4,100 in card balances.
The relatively high figures have caught many parents as well as credit analysts off guard. Now, financial advisers are urging parents to refrain from giving their college-bound children credit cards unless they are for emergency use. Even with the new credit protection law set to take effect by next year, some experts still advise educating potential cardholders before issuing them cards.
Obama's new card protection legislation will prohibit card companies from giving credit cards to consumers below the age of 21. Applicants can however sign up for new cards if their parents co-sign with them or if they can present proof of sufficient income.
To help first time cardholders take better control of their finances, some states are requiring universities and colleges to hold special credit management classes and programs. Other analysts point out that delaying the issuance of credit cards can have a negative impact on consumers' card scores and ratings. They explain that cardholders need to have some form of credit at an earlier age for them to effectively manage and maintain a favorable credit score.