Often, the twenty-first century is referred to as the "Information Age." With a few keystrokes, a large percentage of individuals on the planet is able to access incalculably large databases containing the sum of human knowledge. No longer do students have to toil for hours in paper-based libraries to complete research; most research can be attained in the home via the Internet. Furthermore, individuals can purchase Christmas presents, apply for mortgages, download music and movies, and communicate with every other individual possessing a computer and Internet access. All of these tasks require relatively little effort and even less time. Even though our century's appellation, "the Information Age," is accurate, perhaps the time in which we live would more aptly be called "the Instant Gratification Age." The world of knowledge is at our fingertips, and we can get this information fast. Patience, for some, is no longer a precious virtue, and our modified value system, namely that we should have everything we want, right now, affects more than the way in which we navigate the Internet. Because our society is increasingly digital, tangible cash is used infrequently. Commerce on the Internet is conducted almost entirely with credit cards or with Internet accounts established with credit cards. For many, particularly young people for whom cash has never been a necessity, it is easy to give in to the urge for instant gratification, even when there are no funds available to support this gratification. In particular, college students may fall victim to this trap: they may not see a credit card purchase as spending with "real money," they have little or no experience with credit cards or loans, and they are new to living independently from parents who have advised them not to buy things in the past. It is easy and enjoyable to use credit cards for purchasing fancy dinners and fashionable clothing, and many students do not understand what an "APR" is or why it is important to avoid carrying a balance on a credit card (Bragg). To complicate matters, graduating college students today typically owe about $27,900 in federally-funded student loans, which is fifty percent more debt than possessed by college students six years ago (Auer). Increasingly, student debt upon graduation is a crippling burden upon the student ("Graduated payments"). However, the solution to the problem of out-of-control student debt is not, as some suggest, to tell college students not to have credit cards (Singletary); rather, college students should learn how to use their credit cards wisely and how to structure student loans and career plans with an eye toward the future, both of which can be accomplished by attending personal finance classes and by beginning with smaller credit card lines.
The problem of student debt is twofold, and therefore, managing student debt should employ a double-barreled approach. Credit card/consumer debt is only one facet of the student debt issue, but students need to be able to distinguish between their necessary federally-funded student loan debt and their self-imposed credit card debt. In recent years, it has become common practice for credit card vendors to set up shop on college and university campuses, usually near the school bookstore (Fisher). Once established on campus, credit card companies attempt to lure students into signing up for credit cards by offering free incentives such as tee shirts or water bottles (Fisher). It is all too easy for students to succumb to the temptation for and the ease of obtaining credit cards when these credit lines are pushed so forcefully toward the often naive college student cohort. However, these same college students are often shocked when they receive their credit card bills; it is alarmingly easy to "max out" a credit line, and the idea of accumulating interest is a foreign concept to many young people (Bragg). According to a 2000 Nellie Mae survey, seventy-eight percent of undergraduate students have credit cards, and of this seventy-eight percent, almost a third have at least four cards. Among the initial seventy-eight percent of students possessing credit cards, average credit card debt is $2,748. Nine percent of these students have at least $7,000 in credit card debt (Bragg).
Personal finance education is crucial if students are to avoid destroying their credit histories before they really even have them. $7,000 in credit card debt can be overwhelming to a student with no immediate access to extra income, as was tragically proven in the cases of Mitzi Pool and Sean Moyer, both students at the University of Oklahoma. Pool and Moyer each committed suicide, presumably over credit card-induced stress (Bragg). Personal finance education might have saved Pool and Moyer, and personal finance education will surely help students plan to initiate good credit. Students may not know that they can begin to establish credit with secured credit cards, which are backed by money the student places in savings with the credit card company (Singletary). The limits on secured credit cards are usually low, and the interest rates are usually high (Singletary), but a student who is educated in the ways of personal finance will know that the best way to avoid paying interest on a purchase is to pay balances off immediately. Another way in which students would benefit from personal finance education is with the demystification of annual percentage rates (Bragg), late fees, and over-limit fees. Once students understand how interest accrues and the penalties for late payments, they may be less inclined to spend freely with plastic. However, personal finance education is useful when navigating the complex world of federally-funded student loans, as well.
The second aspect of student debt is that of the federally-financed student loan. College students today do not have the same opportunities upon graduation that their counterparts had just a few years ago ("Graduated payments"). It is often difficult for recent graduates to find jobs, and the grace period to begin paying off a federal student loan is only six months ("Graduated payments"). Many college students, however, will not be able to attend school unless they have the support of federally-funded student loans. Therefore, college students need to be educated in a number of different areas. Before accepting federal financial aid, students should consider whether their potential future job can support their monthly student loan payment ("Graduated payments"). Additionally, students may be able to consolidate all of their student loan debts into one loan with a lower interest rate, and they may also be able to extend their repayment period over thirty years (Auer). Having this information will help students to address their debt load intelligently, and they will not have to give up their valuable education to do so. It may no longer be enough to follow one's dreams in college, particularly if those dreams will lead one into an impossible debt situation, but an individual's future earnings will likely increase if they have a college education (Auer). Personal finance education will assist students in determining whether a dream career will be cost effective and on how to structure their payment plan ("Graduated payments"). Personal finance education can even instruct students on what to do if they default on their federally-funded student loan, an action which can result in a bad credit report, wage garnishment, and the seizure of tax refunds ("Graduated payments").
Perhaps the most valuable service personal finance education can provide is to help college students see the necessity of delaying gratification until actual funds are available and of living within one's means today in order to preserve future happiness. It is all too easy to spend on small items and temporary pleasures, but bad credit can prevent today's college student from purchasing a new home or car in the future. Moreover, the solution to extreme student debt is not to prevent or limit students from using credit, but rather, to instruct students about the consequences of using credit cards and of signing for student loans, so students can spend wisely and plan accordingly. Inexperienced and ignorant college students are at risk of developing poor credit histories and of compromising their futures, yet sticking their heads in the sand will not protect them when they are out of college and must begin to deal with the world of credit. College students can best protect themselves by attending personal finance classes and by beginning to use credit responsibly and with all of the facts at their disposal.
Auer, Holly. "On Borrowed Time: Amid the rising cost of college education, graduates are facing the daunting task of repaying loans as they build careers." Buffalo News. 30 Sept. 2003, A1. ProQuest. Truckee Meadows Community College Lib., Reno, NV. 15 July 2003 http://gateway.proquest.com/openurl-ctx_ver=z39.88-2003&res_id=xri:pqd&rft_val_fmt=ori:fmt:kev:mtx:journal&genre=article&rft_id=xri:pqd:did=00000044655549&svc_dat=xri:pqil:fmt+text&req_dat=xri:pqil:pq_clntid+17862>.
Bragg, Roy. "Beyond their means: Lured by easy credit and a desire to live large, college students are starting adulthood thousands of dollars in the hole." San Antonio Express-
News. 19 July 2003, 10H. LexisNexis Academic. Truckee Meadows Community College Lib., Reno, NV. 15 July 2003.
Fisher, Mark. "Wright State University: New Rules Limit Credit…
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