Magazine article University Business

Money Management 101 Needed: Credit Card Use Is Up among Students; Financial Literacy Down. (Financial Aid Watch)

Magazine article University Business

Money Management 101 Needed: Credit Card Use Is Up among Students; Financial Literacy Down. (Financial Aid Watch)

Article excerpt

According to the July Nellie Mae study, Undergraduate Students and Credit Cards: An Analysis of Usage Rates and Trends, 83 percent of undergraduates attending four-year public and private institutions owned at least one credit card last year, up from 67 percent in 1998. Meanwhile, on a national test of basic personal finance skills given by the Jump$tart Coalition for Financial Literacy (jumpstart.org), 12th graders answered only 50.2 percent of the questions correctly, down from 51.0 percent in 2000 and 57.3 percent in 1997.

The increased use of credit cards and tack of personal finance skills finally has lawmakers worried. In September, the U.S. Senate Committee on Banking, Housing, and Urban Affairs conducted a hearing on the importance of financial literacy among college students. Robert Manning, an economic sociologist and author of Credit Card Nation (Basic Books, 2001), pulled no punches when he testified. He pointed out that the two most noticeable trends in the marketing of credit cards to students are the progressively earlier age of opening the first credit card account and the resulting rise in personal debt.

"The availability of greater levels of consumer credit at an earlier age without accompanying financial education is a financial windfall to the credit card industry and its associated network of retailers, including college and university administrators who reap multimillion dollar exclusive marketing agreements," he said.

Sen. Chris Dodd (D-CT) said he would pursue legislation to boost financial literacy among students. But some colleges won't be waiting for that legislation; they have already taken action.

According to Jeff Southard, debt management specialist with the Northwest Education loan Association, a Seattle-based loan guaranty agency, "Many students are accumulating a lot of debt and dropping out of college. …

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