When Scott Olson graduates with a degree in computer science from
Arizona State University this May, he hopes the end of his academic life
will mark the beginning of a promising career and bright future.
What Olson knows, though, is that he will start his young life nearly
$20,000 in the red, the result of four years of borrowing money to fund
his education.
Olson said that in addition to paying for books and classes, that money
also helped defray the costs of his dorm room in his early days as a
student. Now, the money helps pay the rent for his two-bedroom Tempe
apartment that he shares with a roommate.
Sarah Langham, 31, said she borrowed "way beyond" $20,000 in student
loans so she can graduate from ASU with a degree in early childhood
education this year. While the bulk of the money went toward education,
Langham, a single mother, said she also spent a large amount on day care
for her two children, ages 7 and 3.
Langham said she still doesn't feel the weight of having to pay back
several thousand dollars in loans.
"I have all these loans, so I try to ignore it … I guess ignorance is
bliss. I haven't put too much stress on myself about it," Langham said.
Although it sounds unsettling, Olson's and Langham's spending habits
appear to be on par when it comes to college student spending at ASU.
Craig Fennell, Arizona State University's interim director of financial
aid, said that ASU students typically borrow in the neighborhood of
$16,900 over four years. Graduate students are facing student loan debts
closer to $30,000.
"Generally, the trend is increasing," said Fennel, who has worked in
student aid in Arizona and at private schools in the eastern U.S. for
nearly 15 years.
Loan provider Nellie Mae reports that undergraduate student loan debt
jumped significantly since 1997. The average undergraduate debt is now
up to $18,900, nearly a 66 percent increase from the $11,400 it was only
seven years ago, the report said.
Fennell attributes the spike to a few major factors, including tuition
increases, which are occurring across the board.
"Some students borrow for all expenses and choose not to work also," he
said adding that some students prefer to focus on their education and
graduate.
Graduating senior Laura Meyers is one of those students. Meyers, a
housing and urban development major, said she was working full time
prior to taking out $10,000 in student loans. She said she used the
loans to supplement her income and switch to a part-time job.
"My grades went up automatically when I started working less," she said.
"I wasn't stressed out."
In addition to racking up student loan debt, many college students will
also have to contend with the pomp and circumstances of turning to
high-interest credit cards to help bridge financial gaps and fund what's
loosely known as "student life."
Olson admits he amassed nearly $6,000 on his three credit cards during
his time as an ASU student.
Olson, whose parents provided no financial assistance, said he used his
credit cards to fund trips to Las Vegas, to visit family in Minnesota
and to attend a workshop in Chicago with an on-campus comedy group.
Olson said getting financial aid wasn't difficult. It was even less
difficult, he said, to obtain a credit card.
"It's very easy," Olson said. "I think every undergraduate student is
inundated with hundreds of credit card applications."
The 22-year-old stated that his first credit line was set at $500. He
said his second limit was established at $1,500 and the limit for his
third credit card capped off at $2,500.
Nellie Mae also reports that students double their credit card debt and
triple the number of cards in their wallets between the time they first
set foot on campus and graduation. By the time college students reach
their senior year, Nellie Mae reports, 31 percent carry a credit card
balance between $3,000 and $7,000.
Dr. Robert Browning, author of the book "Credit Card Nation: The
Consequences of America's Addiction to Credit" said while mounting
student debt may be common, it doesn't necessarily make it is right.
Students are now the fastest-growing demographic of people declaring
bankruptcy, Manning said, explaining that hard numbers are difficult to
come by because of the political nature of the issue.
"What credit card companies are doing is trying to get people into debt
at an earlier and earlier age, making them less likely to complete their
studies," Manning said, explaining that credit card marketing over the
years has switched from college seniors to freshman and has now trickled
down to high school students.
Manning said that students who use credit cards are mimicking the
behavior of their parents and are easily swayed by companies' persuasive
marketing tactics. The student groups most vulnerable to accumulating a
large amount of debt at an early age are recent immigrants to the
country and minorities who are the first generation in their families to
attend college.
"They're looking for ways on how to fit in and are more likely to fall
into the consumerism trap," Manning said.
University students are easy targets in general for large credit card
companies, though, because they tend to have the least amount of
knowledge, Manning said. He chides companies for inconsistent criteria
for obtaining credit cards. Students are also more likely to buy into
the idea that credit cards are a good way to establish a credit history.
Manning said that any plan that demonstrates the ability to pay monthly
installments, such as a cell phone, utility bill or rent, should work
just as well.
Langham said she sidestepped credit cards during her college career,
knowing she would abuse them.
"That's my ticket to jail," said Langham, who is hoping to get a
teaching job following her May graduation.
Recognizing that credit card debt is becoming a growing issue for
college students, Fennell said ASU is working on a program that gets
students thinking about budgets.
But Your Credit Card Companies, a partnership between six large card
companies, claims that ballooning student debt is a myth.
According to YCCC's Web site quoting a 2002 Georgetown University study,
"This is simply not the case. In fact, most college students manage
their debt responsibly. Recent studies show that students manage their
credit accounts as well or better than the older adult population. In
any given month, student accounts are more likely to pay off the balance
in full and have substantially smaller limits and charges."
The Web site also offers information aimed at young adults and students
on the best ways to handle the newfound responsibility of credit.
According to Chase Bank spokesman Greg Hassell, the company's programs
are considered one of the best, according to Money magazine.
Despite conflicting reports, Olson said he doesn't have conflicting
emotions about his debt, especially his education loans.
"I consider it an investment," he said.
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