The CARD Act of 2009 put significant barriers up for lenders who wanted to market college students with credit card offers. Now, the bill requires that students show enough income to repay the debt before they can obtain a card. In many cases, they also need a co-sponsor to get a credit card. Due to these changes, the percentage of college students with credit cards has decreased steadily from 42 percent in 2010 to just 35 percent in 2012.
Frugal is the New Sexy.
Prior to the panic of 2008, credit flowed pretty freely for everyone – even college students. Private lenders loaned quite a bit to students who later graduated with enormous amounts of debt. That didn’t stop students from also getting into debt with credit cards and using them to pay expenses while in school. After the recession hit, a new awareness of debt loads filtered into the student mindset, and many are simply refusing to take on too much debt. There is more interest in “pay as you go” financing and of those that do have credit cards; a full 33 percent did not even carry a balance. Also, no one is really missing those free t-shirts for applying.
Debit Cards For the Win.
For expenses that come up during the school year, students have either turned to Mom and Pop or have used a debit card and their own savings. One of the reasons why debit cards are more popular than credit cards is due to their ease of getting one. All students have to do is get a bank account to get access to a debit card. As long as they or their parents put money in the account, they can use it like a credit card without mounting up extra debt for later.
Better Choices to Save Money on College.
Will limited credit options students are paying more attention to how they spend their money than where to get more. Both parents and students admit that their finances have impacted their college choices. Many families are opting to go to cheaper schools than to try to go to a more expensive one. Other types of costs that can be mediated instead of financed long-term are living costs. If the student lives at home and goes to school locally there is no charge for room and board and that cost can be dropped for the student.
Good Financial Habits are Pretty Awesome.
By engaging cash and debit cards first, students develop good financial habits that tend to stick with them as they progress in school. The fact that freshman are the least likely to have a credit card is a good thing and won’t deny them credit later. By the time a student becomes a senior, they will be able to take out a loan as long as they can prove they can repay the loan. They will also have a better idea how to manage their money having done so earlier by using savings or income to pay off their school bills. In that way, the CARD Act appears to be working to reduce the debt liability of graduating seniors and providing them with a better financial education while in school.