Patrick-Murray Administration Offers Financial Literacy, Credit Card Education to College Students through Project Credit Smarts
Collaborative initiative will reach nine area colleges and over 1,000 freshmen through ongoing educational program
"Young adults need to understand the importance of building a solid credit foundation and developing responsible financial management skills," said Governor Deval Patrick. "Project Credit Smarts will help students gain these critical life skills."
About 200,000 students come to the Boston area's colleges and universities, and they are focused targets for credit card offers. The Office of Consumer Affairs and Business Regulation - in partnership with Roxbury Community College, Salem State College, Pine Manor College, Bentley College, Simmons College, Bunker Hill Community College, Wellesley College, Fitchburg State College, and UMass-Amherst - is offering a crash course for freshmen and other students on surviving the tactics and fine-print catches that can come with credit card pitches.
"I have about $3,200 in credit-card debt, and I think about it every day. It's like something on your chest, you can't breathe. I want to be able to breathe when I graduate next May," said Zenova King, a senior at Pine Manor College who told her story at the press conference. "I'm paying for choices I made, and I will get my debt paid off, but I don't want other college students to end up in the same situation. I hope they can learn what they need to know to make the right choices for their future."
Credit card companies target potential new customers on college campuses across the country, using incentives like low introductory interest rates or free t-shirts or other "gifts." According to a 2009 study by Sallie Mae, a national student loan financing organization, 84 percent of undergrads have at least one credit card, a 5 percent increase since 2005, and half of undergrads have at least four credit cards, a 14 percent increase from 2005. Additionally, the average credit card debt per student is $3,173, and 19 percent of graduating seniors carry balances of over $7,000. The Office of Consumer Affairs and Business Regulation estimates that Boston-area college students as a whole carry over $500 million in credit card debt.
"College students have plenty of opportunity to get a credit card, but few places to get information about how to manage that card and not fall into a spiral of debt," said Barbara Anthony, the Undersecretary of the Office of Consumer Affairs and Business Regulation. "By creating Project Credit Smarts, we're bringing onto college campuses the toolbox students need to properly handle credit cards and debt."
More than two-thirds of undergrads buy school supplies, like textbooks, with a credit card. But those costs can multiply quickly, students are told at Project Credit Smarts seminars. For example, if a student charges $1,000 of textbooks on a credit card with an 18.5 percent interest rate, by paying the monthly minimum a student would take nine years to pay off the books and accumulate another $1,000 in interest.
Through Project Credit Smarts, college students get a tutorial on the ins-and-outs of terminology - such as the differences between a debit card, credit card, and charge card - that they often don't know, and also are made aware of potential problems created by mismanaged credit cards, from higher interest rates and fees to credit issues later when buying a car or house.
"Roxbury Community College is pleased to offer an opportunity to its students to learn how to manage credit and avoid the pitfalls of long-term debt," said Roxbury Community College President Terrence A. Gomes. "In this difficult economy, it is especially important for RCC students to become better educated consumers."
Along with participating colleges, the Office of Consumer Affairs and Business Regulation is collaborating with nine partners on Project Credit Smarts, the Federal Trade Commission (which created the original Project Credit Smarts program), the Massachusetts Division of Banks, the Federal Deposit Insurance Corporation, the Federal Reserve Bank of Boston, the Massachusetts Bankers Association, the Massachusetts Credit Union League, Inc., the Better Business Bureau, Sallie Mae and Nellie Mae.
"Being financially astute is nothing less than an essential survival tool," said Sheila Bair, the Chairman of the FDIC. "Financial education is very important during these challenging economic times."
Throughout the Project Credit Smarts program, students are given a number of tips to remember when considering a credit card, such as:
- Not falling for sales tactics or gimmicks
- Not grabbing every card offered
- Being aware of rules on fees and interest rates
- Noting fringe benefits
- Being aware, above all, of paying the balance off monthly
Already this fall, Project Credit Smarts seminars have been held at Salem State College, Pine Manor College, and Bentley College. As of today, over 20 sessions have been scheduled, and it is expected that over 1,000 freshmen will attend seminars this fall. In addition, the Office of Consumer Affairs and Business Regulation plans to make its Project Credit Smarts materials available to all colleges in the Commonwealth.