Credit card debt on college campuses: causes, consequences, and solutions

College Student Journal, Sept, 2002 by Jill M. Norvilitis, Phillip Santa Maria

Unfortunately, even among students who take such classes, training alone may not combat the behavior that gets students into financial trouble. In the Youth and Money survey, there were few differences in behavior between the 21 percent of students who had taken a personal finance course and the 79 percent who had not (ASEC, 1999). Students may know what they should do, but do not carry through on it. For example, although most students report that they have credit cards for emergencies, only 13 percent of cardholders reported that they actually limit use to emergencies (PIRG, 1998).

Information provided to students when they apply for credit cards also does not appear to solve the problem. The PIRG study found that 59 percent of student credit card holders found the education materials provided with applications to be not helpful or "unreadable." Further, one-quarter of students found teaser rates--lower introductory rates--to be misleading.

Another factor related to student credit card debt is one's attitude toward money. Boyce and Danes (1998) argue that teenagers experience "premature affluence" because of their high levels of discretionary income and almost no bills. Some teens may become used to a certain lifestyle and not know how to adjust when bills increase in college. Further, some students may be more comfortable with debt. Davies and Lea (1995) reported that higher levels of debt in college students were related to greater tolerance of debt. The authors hypothesized that college students accumulate debt because they believe that their current financial situation is temporary and that short-term debt will be easily repaid and is not a problem. Students may be willing to tolerate debt so that they can maintain the comfortable lifestyle to which they are accustomed. Further, those in debt are more likely to have attitudes that are more favorable to credit and are more likely to have an external economic locus of control. That is, they are more likely to think that things external to them control their finances (Livingstone & Lunt, 1992).

How Can the Problem Be Addressed?

Clearly, consumer debt is a problem for a significant number of students. Many students lack the knowledge of how to handle credit and have attitudes that suggest that debt is acceptable. As noted above, even students who have participated in courses on financial management do not handle credit significantly differently than students without such courses. What then can be done?

First, education is key. However, education must go beyond providing information. For example, early generation sexuality education focused on improving knowledge about sexuality and helping students to clarify values. Although there is some evidence that these programs increased knowledge, they did not reduce teen pregnancy or delay sexual activity (Kirby, 1992). Effective sexuality education programs provide information, but also focus specifically on reducing risk-taking behavior, are based on established theories of social learning, teach through activities rather than lectures, and address media influences on sexual risk-taking (Kirby et al., 1994).