Paying for college: Credit cards are a bad idea

WASHINGTON -- As the fall semester beckons and financial aid from parents and the government runs dry, more college students are turning to credit cards to pay not only for their textbooks, meals and transportation but also for tuition.

A recent survey by U.S. Public Interest Research Groups found that two-thirds of college students have at least one card, 70 percent pay their own monthly bills and 24 percent have used their cards to help pay tuition.

That helps explain why the average survey respondent will graduate with more than $2,600 in credit card debt, and those with student loans will owe nearly $3,000.

Andrew Kunka charged $4,000 to his credit card several years ago to help pay tuition at Loyola Marymount University in Los Angeles. Now a first-year law student at Rutgers University's Newark, N.J., campus, Kunka struggles to make the minimum payment on the card, which is nearly maxed out.

"I feel like credit card companies target us because we really have no financial awareness," said Kunka, who's 22. "We're barely out of our homes, barely having experiences as adults, and they throw these things at us, and they don't make you aware of what you're signing into."

In recent congressional testimony, a card industry representative said stories such as Kunka's were aberrations and that two out of three students paid their card balances in full each month.

However, concern about college students' credit-card debt has led regulators, lawmakers and consumer advocates to question whether schools are making it too easy for card companies to market their plastic to students.

Schools get millions

Of particular concern are exclusive agreements in which card companies and banks pay millions of dollars to schools or alumni associations for preferential treatment with their card-marketing efforts. The perks can include prime marketing space in high-traffic areas on campus or the use of a school's name and logo on their cards.

Three hundred of the nation's largest universities collectively pocket more than $1 billion a year on these marketing deals, said Robert D. Manning, the director of the Center for Consumer Financial Services at the Rochester Institute of Technology, in Rochester, N.Y.

The New York Attorney General's Office is investigating the practice nationally, but Benjamin Lawsky, a deputy counselor with that office, provided few details of the probe in recent congressional testimony.

"I think when those provisions in these agreements become public, sometime relatively soon, I think it will shock many people, the kinds of relationships that some of these credit card companies have with the schools," Lawsky testified.

Personal info sold

The agreements are usually confidential and often require the school to provide students' personal contact information, such as telephone numbers, e-mail addresses and home addresses.

This can lead to a deluge of card offers. Although most issuers frown on applicants with shallow earnings and sparse credit histories, college students with similar attributes are coveted as potential long-term customers whose earnings will increase with time.

So students face aggressive card promotions on campus, where they're vulnerable to a host of marketing tactics.

One company offered free rides in a bicycle taxi if students watched a video pitch for its credit cards. Others set up tables around campus and offer free T-shirts, movie rentals, music downloads, Frisbees and even food if students fill out card applications.

Experts say these temptations can make an already-difficult decision even harder for young adults with little financial know-how.