New Credit Card Bill Will Affect College Students

By Staff
May 21, 2009

The credit card reform bill which President Obama is expected to sign by Memorial Day will protect students at colleges and universities from arbitrary rate hikes, but could result in less access to credit at a time when they need it most.

The Christian Science Monitor notes that according to a survey on credit card usage by Sallie Mae, half of college students carry four or more credit cards and carry an average balance of $3,173. Moreover, the survey indicates that nearly one-third of college students pay tuition with credit cards, up from 24 percent in 2004, and that over 75 percent of students carry a monthly credit card balance.

"The bottom line is that young adults are plunging into credit card debt, in particular, on campus," said Christine Lindstrom of US PIRG, a federation of public interest groups, who supported passage of the bill. "Unfortunately, on campus, however, they're targeted with cards that have terrible terms and conditions, and these cards are aggressively marketed to them."

James Martin, vice president of student affairs at Pensacola Junior College in Florida, agreed, adding that younger students are often not prepared for the responsibility of credit card use.

"Kids, when they're 18 or 17 and someone plops down that application for a credit card, it's very enticing because they can go out and get this and that," Martin told the Pensacola News Journal. "But when that bill comes, it's a totally different thing."

The new credit card bill bans credit card companies from issuing cards to consumers under 21, unless a parent or responsible adult co-signs the application or the applicant demonstrates the financial ability to repay the debt. In addition, it limits preapproved offers of credit to young consumers and bans increases in credit limits unless the person who co-signs the application approves the increase in writing. Finally, for full-time college students between 18 and 21 who do not have co-signers, credit will not be permitted to exceed $500 annually or 20 percent of the student's gross income.

Although the measures are intended to protect young consumers from being saddled with unmanageable debt, critics argue that the new law will restrict credit to students at a time when many are struggling to afford college expenses.

"It doesn't strike the right balance between enhancing consumer protections and ensuring that credit cards remains available," remarked Peter Garuccio, a spokesman for the American Banking Association. "Clearly, it will limit their access to credit."

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