Credit Troubles Burden Students

Rodney M. Glasgow '01 doesn't lie when he applies for credit cards. He always lists his annual income as about $2,000--a normal figure for most college students.

So Glasgow says he has been surprised during these three years in college to find companies that would respond to his applications with lines of credit that often exceeded his income for the entire year.

Indeed between all the cards currently in his wallet, Rodney says he has more than $8,000 in available credit--enough to buy a used car or a brand new wardrobe on a whim.

"It's clear that if I maxed out all my cards, I would never in my life be able to pay it off," he jokes.

But laughing aside, Glasgow says he is almost relieved only to have $1,000 debt to pay off, a figure dramatically lower than the several thousands he owed not long ago.

Sadly, though, Glasgow's credit plight is becoming less the exception and more the reality both at Harvard and on college campuses across the country.

Buoyed by a booming economy and a culture that encourages spending, college students are increasingly relying on the easy money offered by credit cards--and they're running up debts to prove it.

Although the problem seems still in its infancy at Harvard, administrators, consumer advocates and government officials say they are struggling to address the rising debt before it spirals ever more out of control.

The Easy Way In

Students say the option of paying by credit makes getting into serious debt a relatively easy task.

With four credit cards to her name, Gabrielle C. Hunter-Rivera '02 says she spent freely during her first year at Harvard, eating out frequently at restaurants and making lots of small purchases at CVS.

"They have those little machines where you just swipe your card," she says. "It makes it too easy."

The hundreds of dollars of balances that were building on her cards never registered on her radar, she admits, until her father discovered the mounting debts this past summer. Only then did Hunter-Rivera begin to clean up her act.

"I'm spending a lot less this year," she says. "I think twice now."

And for Glasgow, using credit cards for purchases became so automatic that he barely recalls the items that led to the debts he's just now paying off.

"Right now I'm in about $1,000 worth of debt and frankly I can't even remember what I bought," he says.

This phenomenon, according to Juliet B. Schor, consumer theorist and author of The Overspent American, illustrates a widely-known fact: paying with credit cards is "a relatively painless type of transaction" which has been shown to increase the amount people purchase.

And making purchases on the Internet--a popular tool of the young--only compounds that degree of painlessness says Schor, who teaches Women's Studies 132, "Shop 'Til You Drop: Gender and Class in Consumer Society" and is the director of studies for the committee on degrees in women's studies.

But more than just the ease of using credit, Schor and others say the trend toward increased debt reflects changing cultural norms--some of which may be due in part to the efforts of credit card companies.

Schor's theory suggests that there has been a shift in the way consumer aspirations and desires are formed, with consumers now more likely to look to the top of the income distribution for the cues about what to buy.

Though much of her research centers on the consumption behavior of adults, Schor says her theory of consumer society can be applied to Harvard--where many students are "thrust" into a reference group that is relatively affluent.

"I would bet that for students of moderate economic background who come here, that they become very aware that many of their classmates came from backgrounds of substantial wealth and privilege," she says.

Many new students use their new financial independence to compensate for their different backgrounds--buying items like clothes and material goods that signal status, according to Matthew J. DeGreeff '89, a senior admissions and financial aid officer and a first-year proctor.

He says that each year he witnesses many first-years who arrive at the College, only to go straight out and create a new image--often financed by credit.

"All of a sudden they're wearing clothes beyond their means," he says.

This willingness among college students and young adults to spend so freely--while not necessarily a new development--has been aggravated by the more prominent role credit cards play on campuses.

In researching his recently-released report entitled "Credit Cards on Campus: Costs and Consequences of Student Debt, " Georgetown University sociologist Robert D. Manning says he found that mass marketing has helped hasten major changes in consumption patterns.

Manning contrasts the situation today with a time in America when people set their personal standards of living to their expected earnings. A glut of easily accessible credit has changed that, he says.

"The credit card industry has tried to fracture that cognitive connection," he says.

By marketing credit cards as comprehensive lifestyle enhancers--complete with celebrity spokespeople such as comedian Jerry Sienfeld and golf star Tiger Woods--rather than just convenient tools of purchase, Manning says credit card companies are hooking more and more young people. Credit card companies, he says, are bringing about a "cultural revolution."

Tackling the issue

However dire the predictions, higher education leaders, government officials and consumer advocacy groups have started to examine ways to help control the debt problem.

Just last week, the state of Connecticut convened a special committee of administrators from public and private colleges throughout the state to discuss problems associated with credit cards on campus.

Deborrah Glenn-Long, who is the director of the student financial services center at Yale University, participated in the meeting and said the committee highlighted the way different schools are affected by debt.

Over the 12 years she has worked in the financial aid office at Yale, for example, Glenn-Long says the majority of students she has seen with credit card debt have it as a result of what she calls "unnecessary" spending or borrowing. Although the scope of the problem is small, she says potential effects can be devastating.

"I consider it a problem even if it's for only two percent of the population--the consequences are so dire," she says.

An interesting point made at the meeting, Glenn-Long says, was that community college students, who are usually older than traditional four-year college students, often take on credit card debt to meet the difference between the whole cost of tuition and the amount of financial aid they receive.

"If you happen to have that gap, a credit card is an easy way to meet it," she says.

Back at Harvard, DeGreeff says that the problem is not especially pronounced, but it is nonetheless a big issue for first-year students who are new to the financial independence.

"Before they know it, they're behind the eight ball in terms of credit card debt," he says. "That's what scary to me as a freshman proctor."

Taking Care of Business

DeGreeff isn't the only one scared.

Spurred by several of suicides by college students unable to cope with mounting credit debt, Manning of Georgetown says he has used recent appearances on ABC's "Good Morning America" and on National Public Radio to encourage universities to address the problem.

He is critical of the surveys some colleges use to measure the magnitude of credit problems on campus because they typically draw from a pool of enrolled students.

That type of methodology, he claims, fails to get to the heart of the problem.

"The people with the worst credit card problems are not captured--they've [already] dropped out," Manning says.

To prevent unmanageable credit from reaching the level where students have to drop out, a number of consumer advocacy groups have set up programs to help educate students about the advantages--and dangers--of using credit cards.

Richard M. Flaherty, president of College Parents of America, a not-for-profit advocacy group based in Washington, D.C., says it was the persistent concerns of parents that spurred his organization to set up a program that assists students and their parents with credit-related issues.

"[Parents] were unable to assume that their students were prepared with the money-management skills," he says.

As a result, his group founded a program known as Money Talks. In conjunction with MasterCard International, the show seeks to educate students and parents on the basics of budgeting, using credit and learning to spot habitual overspending.

"I recognize that credit cards can be a challenge to students, but our feeling is that education can make a difference," he says.

Although DeGreeff says he tries to educate students in his proctor groups about the characteristics of being responsible consumers, the College as of now has no specific programs to counsel students with personal financial troubles.

Although many Harvard administrators suggest the situation seems not to be out of control as of yet, Associate Dean David Illingworth says if there is enough demand for such services, the College will supply them.

"If enough students needed help or wanted help, the University would find something," Illingworth says.

But he admits the best defense against debt is just using some common sense.

"I think Harvard students are smart enough to understand 20 percent interest and the fact that if you're going to make the minimum payment, you're going to be paying for a long time," he jokes.