Will Credit Card Debt Relief Be Needed to Bail Out College Students?
Americaâ€™s college students may need some major credit card debt relief in the near future, according to a recent study of financial literacy on campus.
The study, â€śFinancial Literacy and Credit Cards: A Multi Campus Survey,â€ť conducted by researchers from five U.S. universities, was published this April, coinciding with Financial Literacy Month. The study found major problems with U.S. studentsâ€™ understanding of credit cards and credit card debt:
- Seventy percent of students have credit cards
- Five out of six of those students are unaware of their cardsâ€™ interest rates
- Seventy-five percent of those students donâ€™t know what their late-payment fees are
- Seventy percent of those students donâ€™t know what their over-balance fees are
As a result, more than 90 percent of college students who have credit cards are carrying monthly credit card debt. Perhaps more shocking was that nearly all of the 725 students who participated in the 2009 survey were business majors.
â€śOur students lacked even basic financial knowledge of a common credit tool that many of our students used every day,â€ť the study said. â€śThere is no way to describe these results as a success in education of financial literacyâ€ť (â€śSurvey: Students Fail the Credit Card Test,â€ť Fox Business, April 16, 2012).
There were several other troubling findings in the study as well:
- Credit card use â€śhas snowballed in the last decadeâ€ť on campus; in 2004, the average student credit card debt was $946, but by 2009 the average had climbed to $4,100
- Nearly a third of college students with credit cards had more than one card
- Only 9.4 percent of students paid their credit card debt in full each month, a steep decline from 32 percent in 2003
- Only 14.6 percent of students claimed to know their interest rates
- Demographically, younger students used credit cards more than older students; students who had taken an ethics class were more aware of interest rates, and employed and married students tended to be more responsible users of credit cards
In the end, the studyâ€™s conclusions were disturbing. â€śThis result may also explain part of our national problem with credit,â€ť the study said. â€śIf our college students do not understand credit costs, what can we expect from the larger portion of our society without a college education?â€ť
â€śThese results should serve as a wakeup call for both our college students and our college outreach efforts into the community to train people about the costs of credit. It is clear the status quo of financial literacy is a failure.â€ť
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