Even before they graduate, students find the word is, indeed, plastic COLLEGE CREDIT


For college students, credit cards are easier to get than a beer.

Students are barraged with applications touting sign-up specials and promises of financial independence all courtesy of credit card companies faced with a shrinking consumer pool. Ill-equipped to handle this newfound fiscal freedom, many students max out their cards and call home for help to pay off their spending sprees.

The easy promises touted in credit card ad campaigns ensnared Mike Starkenburg. A 22-year-old senior studying at George Washington University in Washington, he's part of the college student market that spends $28 billion annually -- in cash and credit -- according to MasterCard.

When he was 18 -- and thus able to sign a legally binding contract -- Mr. Starkenburg received an application for a VISA card from Citibank. He filled it out, and sent it back. He didn't have to prove income, as long as he was college-bound. He didn't need his parents' signatures, either, as long as he just put their names down, he says.

Citibank sent him a card a few weeks later, with a credit line set at $300. Now, four years later, it's up to $2,200.

Mr. Starkenburg then acquired three more cards -- none requiring a co-signer. Soon, he ran up more than $9,000 in charges.

"I did all kinds of goofy stuff with my cards," says Mr. Starkenburg. "I bought everything. I even went sky-diving."

On campus, credit card representatives set up tables in the student union, offering free gifts to anyone who signs up. On the bulletin boards and kiosks are tear-off-fill-out-send-in application dispensers. The big boys -- MasterCard, Visa, American Express and Discover -- take out full page ads in student newspapers. (Although its card is not a "credit" but a "charge" card, which requires payment each month on the total balance, American Express also targets college students, who can't wait to carry plastic.)

According to industry spokespeople, college students want credit cards because they offer security and convenience, and can help establish a good credit rating early. And horror stories of students running amok with credit cards are anomalies.

"When we look at the performance portfolios of college students as a group, we find that they perform just as well or even better than adults," says Maria Rullo, spokeswoman for Citibank in New York. Citibank has been offering Visa and MasterCard to college students since 1983.

According to data from Visa U.S.A., students pay the balance in full in 53 percent of the months when the card is used.

"It's telling us that the students are using the cards the way they were intended," says Ms. Rullo.

But this high percentage of college students paying their bills may be misleading, because there's no way to tell if parents are helping out, says Ruth Susswein, director of Bankcard Holders of America, a non-profit consumer group based in Herndon, Va., that deals exclusively with credit issues.

"When issuers say college kids don't default, that's not the whole story. Our feeling is that the issuers are relying on a moral obligation by the parents to bail out their children," says Ms. Susswein. "That's not treating them like adults."

Mr. Starkenburg's parents, however, bucked that so-called "obligation" and wanted to let him pay off his debt.

"I wouldn't let him get into a horrible experience, but it's a good lesson," says Mr. Starkenburg's mother, Terri Epperson of Laguna Beach, Calif. "Once you start rolling with the cards, I know it's hard to stop, but by the time your kids leave for college, hopefully they will have learned enough responsibility to use credit cards."

Cathy McLaird of Cockeysville, a 23-year-old graduate student at Towson State University, was luckier in getting help from the home front.

"When I was an undergraduate, I was about $2,500 in debt," says Ms. McLaird. "My mother gave me the money and said 'you've learned your lesson.'

Credit is a luxury

Credit, according to Ms. Susswein, is a live-by-the-sword, die-by-the-sword luxury. Students can use plastic to take care of emergencies and start building a good credit history, but bad credit early on can make a shambles of their financial lives.

Students with botched credit records risk denial for educational loans, home mortgages, even chances for getting another card in the future, according to Ms. Susswein.

"It's a scam," says Ted Colbert, 20, of Randallstown, who is studying electrical engineering at Morehouse College in Atlanta. Although he admits having little consumer debt, Mr. Colbert thinks the issuers prey on college kids because of their high earning potential.

"They know when we graduate, we'll get thirty, forty, fifty-thousand-dollar-a year jobs, pay them off, plus the interest, and still be dummies and keep the card," he says.

But some consumer groups feel that creditors are not totally at fault.

"If you start assessing blame, you can pass it around. I give the example of a gun," says John Gangler, educational director for the Maryland Consumer Credit Counseling Service. "Just because I give one to you doesn't mean you have to shoot yourself with it."

The consumer service offers one-on-one credit counseling and budget management for free.

Both Mr. Gangler and Ms. Susswein advocate increased education to temper the damage wrought by students who may not be familiar with how credit works.

"I had no clue how credit and interest worked. I still don't understand," says Mr. Starkenburg. However, he has managed to whittle his balance from $9,000 to $4,000 by interning this summer at, in a sweet twist of irony, the International Monetary Fund in Washington.

"Those little disclosures at the bottom of the statements? They're not written in English," he says.

Mandatory credit classes

In March, Ms. Susswein recommended before a congressional subcommittee that mandatory personal finance classes be required, nationally, for all junior high school or middle school students, and that parents should teach their children how to handle credit wisely. Also, she thinks issuers should be required to offer seminars teaching college students the possible pitfalls of plastic.

"[The issuers] are on campus now anyway," says Ms. Susswein, "so it's not as if they would need to make another trip."

Visa, and some of the other creditors, have developed money management guides, slick pamphlets and public service announcements about credit that can be played over college radio stations, programs that even Ms. Susswein admits are "quite good."

According to Visa U.S.A., which developed its program in conjunction with the U.S. Office of Consumer Affairs, some member banks have purchased the programs and donated them to high schools.

But apparently the outreach is too little and, for some, too late.

"I can't really recall getting any educational materials," laments Mr. Colbert. "And with freshmen, they really don't want to listen ,, to their parents. They say, 'Well, I'll just pay the minimum,' but you're paying for the same thing over and over because of the interest."

Often, the credit card companies come searching for payments the same time students are saddled with educational loan repayments. It's a double whammy. While they were in school, many students don't realize how quickly those purchases compound with interest.

"It's especially bad if you're [going to graduate]," says Mr. Starkenburg, who hopes to wipe his credit tabula clean by year's end. "It's a bad time to have your credit . . . [messed up]. It'll be a long time before I'll be able to put a down payment on a house."

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