College students consuming their way deep into debt Credit-card lifestyle and higher tuition blamed


COLLEGE PARK -- Melissa Allen, a psychology major at the University of Maryland, cannot count on her parents for help with tuition. But rather than go deeply in debt with student loans, she is giving up much of the fun of college life by racing through in three years while working 40 hours a week at three jobs.

"I don't want to get out of here with a whole lot of debt," Allen said recently, on a break from one of her jobs.

Even so, she has fallen into a credit trap. After charging part of this semester's tuition on her MasterCard, she cannot pay more than the monthly minimum. At 17 percent interest, she said, the balance is "never going down."

But while Allen is at least worried about being in debt -- and has made sacrifices to avoid it -- college officials say that for too many students, the certainty of owing large loans after graduation is combining with banks' marketing of credit cards to them to provoke another response: Spend now, worry later.

More than any generation before, this one is weighed down by debt -- and increasingly debt of its own making. And sympathy is short for those whose unchecked consumerism brings them to financial crisis before they are out of college.

A Smith College administrator, Myra Smith, said of students who come to the financial aid office saying they cannot pay their bill, "I suspect part of the reason they have trouble paying Smith is because they are paying somebody else."

If their requests for more aid are not firmly denied, she said, "then we're financing their lifestyle."

Financial aid officers say a growing number of young men and women are leaving college with large debts and ruined credit ratings because of credit cards. Not thinking of a college loan as real debt until after graduation, when repayment begins, is one thing, the aid officers said, but students learn too late that using credit cards like cash, rather than regarding them as high-interest loans due now, is quite another.

"I was forewarned to get just one credit card and not go crazy, but I did go crazy," said Melissa Raaff, who ruined her credit by charging $5,000 on credit cards while she was a sociology major at the University of California at Santa Barbara.

"I didn't worry about working because I thought, 'Oh, I'll just put it on my credit card.' It's unfortunate that it affects your credit in the long run."

Spurred by federal requirements, colleges routinely conduct advisory sessions with new students getting financial aid and interviews with those about to graduate or leave college. But the warnings to freshmen, at least, often fall on deaf ears.

"I don't think we make a big impression," said Barbara Tornow, Boston University's executive director of financial aid.

"I think we need to have more responsibility for warning students about getting in over their head."

On some campuses, the credit cards available to students include cards sponsored by the college or university, and that may explain part of the students' lack of concern about $l borrowing.

Banks are bombarding college students with credit-card offers, with minimum requirements, and sometimes send them unsolicited cards.

There is no question that many students cannot avoid debt these days. Tuition increases are outpacing inflation, while colleges are allocating a greater share of financial aid to loans. Since 1993, student borrowing has almost doubled, from $18 billion then to $33 billion in 1996, according to the Department of Education.

Most of this is under the widely used federal student aid plan, the Stafford program, under which student loans from private institutions are guaranteed and subsidized by the government.

This year the average Stafford loan balance for students leaving four-year colleges jumped 15 percent from the 1995 average to $10,146, according to USA Group Loan Services.

Yet the number of students working while in college actually appears to be declining, said Ted Freeman, president of the Boston-based Education Resources Institute. And the more serious problem for students is credit-card obligations, which, unlike student loans, cannot be deferred.

The stakes are high for the banks: Students represent the only large group of uncommitted consumers, and studies show that brand loyalty won early is often won for life.

Borrowing limits on student credit cards start low, typically at $400 or $500, but issuers quickly raise them as a card is used. While some cards for students require a parent to co-sign, many do not.

Beth Kobliner, author of the self-help book, "Get a Financial Life," said she not only didn't have a credit card when she graduated from college 10 years ago, she could not qualify for one for some time afterward.

"Today it's just entirely different," she said, not only in the numbers of young card holders but in their attitude toward using the cards.

On promotion trips, she is repeatedly reminded that many regard their credit-card limit more like a balance to be drawn against than a loan that must be repaid.

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