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A recent article “Looming Credit Debt Threatens Students” caught my eye. The article focused on the dangers of credit cards on campus and the debt faced by many university and college students.

And while the article focused on the evils of credit cards on campus, it is again another example of the point being missed.

Are college students a target for credit card marketing, “Hell Yes”. But where does that marketing come from and who benefits?

Nearly all the college approved or sponsored on campus marketing benefits the school itself with profitable credit card affinity agreements generating income that goes to the school. Campus bookstores drop applications into bags, take one boxes are scattered about and the school allow marketers on campus.

But most people are surprised that those efforts are not the primary place where students discover credit card applications. So where do college students find their credit card genie? Well a study a few years ago found out that most college student credit card applications actually come from the take one boxes at local merchants, off campus advertising and direct mail.

Let’s get real here. What efforts are going to be put in place to stop that kind of off campus availability? What do you want, an off campus no credit card application zone, like a drug zone?

I wish people would focus on what the real problem is, and it’s not credit card marketing. It’s what are the reasons that make credit interesting to students. So let’s look at some of the reasons:

  • I’m Grown Up - Being away from home and in college creates confidence in many and the makes students feel invincible. “What could be wrong with credit”, they say. Or how about “It won’t happen to me.” And neither will STDs.
  • Credit Cards Look Fun - Have you had your eyes closed when the credit card ads come on TV? Have you seen an ad in print? Years on pounding it inside the students head that credit cards lead to priceless fun creates a deep longing and passionate desire.
  • Have It Now - The I want it now mentality is not restricted to college students. In fact their parents typically do a worse job of paying their own bills. What law are you going to put into place to stop an banal drive for instant gratification? What do you want to do next, ban casual drunk sex on campus.
  • Buy Now. Pay Latter. - So what is the ultimate buy now, pay latter student debt? Did you say credit cards? We’ll if you did, you’d be wrong. The biggest student debt is student loans, not credit cards.

Student Loans

So much bad venom is directed towards credit cards as being evil and dangerous but student loans carry a bigger risk. A student that begins college on student loans and does not complete their degree, was it a great life experience or just massive debt? Even a college student that graduates with a degree that had student loans, has massive student loan debt.

My favorite student loan story was a client that signed up for college and after a month decided that it wasn’t for him. He had to repay the entire semester of student loan debt that he never got the benefit of. Sure he dropped out but really, holding him to the full amount?

Debt is Debt

Let’s put the mamby pamby whining aside for a moment and have this argument of good debt versus bad debt. Believers in student loan debt as being good, say that it creates an opportunity for higher income in latter years. They say it can create new opportunities for student in life and all of that is perfectly correct for some. But, for many others, either the degree in photo-microscopy is in a field which pays relatively little or is hard to break in to so while waiting for a break, people have to take just any job to pay the bills.

And before you know it the need to make money to service the debt becomes more important than the dream job, years slide away, and before you know it, you’re in a deep end rut, but with a degree.

But, as the article states “38 percent of college dropouts left for financial reasons, as compared to the 28 percent who left because of academic disqualification and the 13 percent who left because college for social reasons”.

Some of those college students will get their act together and head back to another college but the rest, they are now saddled with a bag full of worthless student loans that will not perform for them.

Last I checked, student loan debt is debt. It’s nothing more than a future financial obligation that must be repaid with the fruits of future labor. And if you stop smoking the debt hype weed for a minute you will realize that that is true for every debt. Debt is debt.

There is no good debt versus bad debt. Debt is pure. It is debt. What makes something more or less wise is the motive and outcome behind it. Debt is just a number.

It really doesn’t matter if a student has to make $900 a month in payments to either student loans, credit cards or a combination of the two. The key here is that the $900 a month is what is sinking the persons financial boat.

Stop trying to rationalize debt. It’s debt.

Is mortgage debt good? Most would say, “Why yes it is.” So is mortgage debt that leads to foreclosure good? Gotcha.

And What’s The Big Problem With Student Loans?

One word need to resonate in your mind when it comes to student loan debt. Discharge. I’m not talking about the painful type.

Student loans for the most part are not dischargeable in bankruptcy. Students can’t get a fresh start at life if they are over-indebted in student loans. Student loan lenders, including the U.S. government, take no prisoners with student loan debtors. If you owe past due student loans you can be charged up to a 40% collection premium, lose your tax refunds and have great pressure applied to you.

Credit card debt is dischargeable. Big difference. Over your head in credit card debt, find a bankruptcy attorney and go bankrupt. It might not be an ideal solution but you do have some access to a fresh start.

If you find yourself over your head in student loan debt, get a third job and reduce your quality of life, consolidate your student loans for a longer period of time which will lead to you paying more interest or defer them and watch the interest and balances grow bigger and bigger.

So Where Does This Problem Begin?

College student loan over indebtedness is routed in behavioral economics and our beliefs. Here is what we believe:

Student Loans - Good
Credit Cards - Bad
Payday Loans - Bad
Selling Blood to Pay for School - Bad
Using Credit Cards to Pay for Textbooks - Good
Access to Credit - Good for People Unless in College
Credit Card Marketing - Bad
Air Miles and Reward Credit Cards - Good
College Degree - Good
Dropping Out of School and Not Finishing - Bad
Paying Off Student Loans Completely - Good
Deferring Student Loans - Bad
Getting a College Degree in a Low Paying Field - Good?
Getting a College Degree, Selling Out Your Dreams, Just to Work in a Higher Paying Field - Bad
Living in Roach Infested Apartment to be Able to Afford School - Good?
Working Three Jobs - Good
Not Having a Life in School - Bad

So which is it? It’s confusing isn’t it. There is no clear path or likely combination that actually results in the individual components of attending college resulting in a purely good financial choice.

campus_marketing.jpg
Photo by Zappowbang

Ban Credit Pushers on Campus

I’m just about done here but before you start throwing dog pooh on credit card marketers on campus you’ll also have to clear out the student loan lenders in the university offices. In fact, they are the ones pushing more debt on our students. So what are your real intentions, of stopping students from having debt, or just the debt you don’t want them to have because you have been told that credit cards on campus are bad.

So That’s It

So the lines get a bit muddled when you look at the bigger picture. And I really didn’t even get to talk much about having to pay for artificially expensive textbooks paid for on a credit card. If student loans don’t provide for room, board and books, and those expenses wind up on a card, is that good debt or bad debt?

Just don’t get such tunnel vision that you believe that student loans or credit cards to college students are so clear cut that one can be good and one bad?

Some want to ban credit cards to college age students, but obesity is the bigger killer, what’s next, no pizza on Friday night? And does that mean that a college age student are adult enough to go off to fight for our country and get killed but can’t have a credit card?

P.S. This has nothing to do with student loans but I just read this amazing posting on How to Build a Mobile Office and Work from Anywhere. I already do most of that but I had not seen it put down so nicely in one post before. Good job Skellie.

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Steve

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