TRENTON – On the day that the Senate Budget and Appropriations Committee discussed state spending on higher education and the borrowing habits of students at New Jersey’s colleges and universities, Senator Barbara Buono announced today plans to re-introduce legislation regulating credit card solicitations on campus and requiring credit card companies to provide consumer credit education programs to students.
“College students are leaving our colleges and universities with an unprecedented amount of credit card debt,” said Senator Buono, D-Middlesex and Chair of the Committee. “On average, they are graduating with well over $3,000, on average, in credit card debt. That’s on top of any college loans they may have taken to pay for school in the first place.”
Senator Buono said her legislation has two main aims – to reign in some of the predatory practices credit card companies use while soliciting college students and to make sure that students are well educated on the responsible use of credit before being issued a credit card.
“Most students entering college have never had their own credit card before and don’t fully understand the risks and responsibilities that come with a credit card. Combine that with deceptive credit solicitations on campus and you have a recipe for financial disaster,” said Senator Buono.
Senator Buono added, “The credit card companies have gotten very clever in marketing on campus. Many times you’ll see these companies set up a table on campus offering free school t-shirts or hats in exchange for an application. At the same time credit card companies will seek financial agreements with these schools to permit them to solicit on campus.”
Senator Buono started looking into credit card companies’ on campus activities after reading a 2001 survey by student loan company Nellie Mae which found that the average combined student debt was $20,402 — including $17,140 of student loans and $3,262 of credit card debt. The percentage of students carrying high-level credit card debt has increased dramatically; one of five students carries between $3,000 and $7,000 in credit card debt. Nellie Mae also reported that many universities say they lose more students to credit card debt than to academic failure.
Under Senator Buono’s bill, credit card companies would be required to register each year with a college or university’s administration before being allowed to solicit applications on campus. Additionally, credit card companies would be prohibited from purchasing or otherwise obtaining students’ contact information from colleges or universities or from offering promotional incentives to students to entice them to apply for credit.
“We now live in a world where credit cards are an essential part of every day life. College is a good time for students to begin to build a good credit history, but without proper education in financial literacy, credit cards pose a serious to threat their fiscal future,” explained Senator Buono.
Senator Buono continued, “Credit cards can be dangerous in the hands of the uninformed. High credit card debt can reduce a recent grad’s ability to pay student loans or to obtain other credit order to buy a car or home. There are even reports now that employers are taking into account the credit scores of applicants when making hiring decisions.”
Senator Buono pointed to several recent reports citing the effects that credit card debt is having on students. According to a 2007 CBS News report, almost one-third of high school seniors and more than three quarters of college first year students have accumulated credit card debt. Additionally, the Center for the New American Dream found that over half of all students carry four or more credit cards by the time they leave school.
The bill would require credit card companies to enroll all students who have signed up for accounts on campus in an educational program on the responsible use of credit. This program would include full explanations of: the financial consequences of not paying off balances in full in order to avoid interest charges; the impact of a shift from introductory interest rates to ongoing interest rates and when and how that shift occurs; the period of time it would take to pay off various balance amounts by paying only the minimum each month; all credit related terms including interest rates, fees and grace periods; and the generally accepted prudent uses of credit, along with the consequences of imprudent use.
Credit card companies soliciting applications on campus would be prohibited from issuing a credit card without proof that the student had attended such an education program.
Finally, the bill would prohibit parents from being held liable for any credit card debt or fees amassed by their children unless they have specifically signed an agreement to be held liable.
Senator Buono said that she plans on introducing the legislation when the Senate reconvenes next month.