Pay more interest to student loans

RALEIGH -- Congress is accusing credit card companies of preying on college students. The House Financial Services Committee held hearings this summer on legislation intended to rein in these companies. Bills in both houses -- part of a larger anti-credit-card-company bill -- would require students without jobs to be at least 21 years old before they can qualify for credit cards, except with the written approval of parents or guardians.

Ten years ago, I was one of the student "victims" lawmakers are trying to protect. I got my first credit card when I was an undergraduate -- sold at N.C. State University's Brickyard along with a free T-shirt.

But my credit card debt was nothing compared with the debt I accrued in the form of government-backed student loans.

Critics such as the lawmakers from Missouri who proposed the credit-card restrictions, Rep. Emanuel Cleaver and Sen. Claire McCaskill, ignore the fact that student loans are as easy to mismanage as credit cards. And the long-term consequences can be much worse.

When I graduated from college, I had about $300 on my credit card, but a college-loan debt of $14,000.

According to Student Monitor, a market-research survey, the average credit-card balance of students who don't pay their entire bills each month is $452. But seniors graduating from North Carolina schools leave with an average of $17,760 in debt, according to the Institute for College Access and Success.

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IN OTHER WORDS, THE EFFECT OF TOO-EASY COLLEGE LOANS far exceeds that of credit cards for most students. Only 41 percent of students have credit cards, and most (65 percent) pay off the full bills each month, Student Monitor says. In contrast, this survey reports that nearly two-thirds of the students at four-year colleges and universities graduate with student loan debt.

College loan money doesn't seem real: It's like a credit card that has no minimum monthly payments (you don't start paying back until you are out of school) and a ridiculously high limit. So my classmates and I spent our college-loan money getting the ultimate college experience. We wanted it all: Greek life, study abroad, the designer jeans, Matchbox Twenty concerts, and off-campus apartments. And we got it all.

When I applied for a student loan, the aid office (and the forms I filled out) led me to believe that I would be loaned the amount of money that I needed. In reality, I received far more.

The College Foundation of North Carolina terms need-based financial aid "the difference between the total cost of attending a specific college program and a family's ability to pay that cost using standard formulas." But those formulas fail to account for other sources of income, from part-time jobs to scholarships. The federal student loan application (FAFSA), which students use to apply for need-based aid, requires only that students report their past earnings and assets, not any scholarships that go straight to the school or their current employment.

Moreover, the formulas used to calculate the cost of attendance (COA) encourage students to borrow not only for the necessities of attending college, but also for luxuries. In addition to tuition and fees and room and board, the COA includes allowances for books, supplies, transportation, loan fees and miscellaneous and personal expenses, including an allowance for the rental or purchase of a personal computer, plus "reasonable" costs for eligible study-abroad programs.

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STUDENT LOANS CAN BE USEFUL, allowing students who could not otherwise afford college to attend. But should government really be subsidizing debt so that students can buy the latest technology or spend a year in Paris?

I didn't spend my excess money on a year in Paris -- but I did take a semester abroad at the University of East Anglia, where I took few classes and fulfilled no credits toward my major. Instead, I saw shows in London, traveled the countryside and spent a 10-day spring break in Paris. I could have easily afforded a less luxurious six months in England using only savings from my part-time job, but student loans were easy to obtain.

The critics are right, to a point. Students rarely think about future ability to repay loans -- I know I didn't. Students don't understand finances well enough to decide how much to borrow, get a good rate or even spend wisely. But instead of badgering credit card companies, Congress should look closer to home. Federal student financial aid creates far more debt for students than credit card companies.

(Jenna Ashley Robinson is campus outreach coordinator for the Pope Center for Higher Education Policy in Raleigh.)