Patrick-Murray Administration and Partners Continue On-Campus College Credit and Debt Education with Year Two of Project Credit Smarts
Collaborative initiative reaches students throughout the state, delivering pointers on smart financial planning
SPRINGFIELD - Sept. 23, 2010 - The Patrick-Murray Administration's Office of Consumer Affairs and Business Regulation, along with a coalition of colleges and business and government partners, launched the second year of its Project Credit Smarts program – designed to educate college students about credit use, including its dangers and pitfalls – at a 2010 kickoff event at Springfield Technical Community College.
Project Credit Smarts was launched last year by the Office of Consumer Affairs and was designed to educate college students about credit use, including its long-term dangers and pitfalls.
"More than ever, building and maintaining a strong credit foundation is important for everyone, particularly young adults," said Governor Deval Patrick. "Students will gain these valuable life skills through Project Credit Smarts."
Approximately 500,000 students are in Massachusetts colleges and universities, many living away from home or experiencing financial independence for the first time. The Office of Consumer Affairs, along with nine business and government partners and 17 colleges and universities, offers a crash course for freshmen and other students on surviving the tactics and fine-print catches that can come with credit cards and other credit.
"After I ended up with a lot debt, I had to file for bankruptcy and basically start over again," said Andrea Craddy, a student at Springfield Technical Community College. "My debt was all-encompassing, and it has taken me a long time to get back up, but I'm on a budget and moving forward with my life."
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 estimates that Boston-area college students as a whole carry over $500 million in credit card debt.
In February 2010, as part of the federal Credit Card Accountability and Responsibility and Disclosure Act, new restrictions were placed on credit card companies marketing to college students. The new rules ban cards for consumers under the age of 21 without an adult co-signer or proof that the applicant has the means to pay the bills, ban the practice of freebies like t-shirts at a campus or college-sponsored event, and mandate colleges and universities must disclose contracts with credit-card marketers that include access to student or alumni information.
"The new rules regarding student marketing of credit cards provide valuable protection for young adults, but in many cases students already have cards and haven't mastered the science of responsible credit management," said Barbara Anthony, the Undersecretary of the Office of Consumer Affairs and Business Regulation. "Project Credit Smarts gives those without a credit card information that will be useful when students do take on credit, and will be an excellent reminder of the rules of the road for those already with credit cards."
Through Project Credit Smarts, college students get a tutorial on the ins-and-outs of credit-card lingo – such as the differences among a debit card, credit card, and charge card; and terms such as "teaser rates" and "dormancy fees" – 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.
For example, students are told at Project Credit Smarts seminars that more than two-thirds of undergrads buy school supplies, like textbooks, with a credit card. But those costs can multiply quickly. 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.
"Clearly this information is vital to all our citizens, and particularly to college students. We'll be holding at least two Credit Smarts presentations on campus, through the Office of Consumer Affairs and Business Regulation, one of which will be open to the public," said Ray Blair, Dean of Students at Springfield Technical Community College. "Most of our students have jobs, and many are also handling family responsibilities, so the more awareness we can offer students on financial literacy, the better. We're very pleased to have this opportunity to present valuable consumer information on credit cards and financial services."
Springfield Technical Community College is one of 17 colleges and universities across Massachusetts partnering with the Office of Consumer Affairs on Project Credit Smarts. The schools are: Bentley University, Bristol Community College, Bunker Hill Community College, Fitchburg State University, Greenfield Community College, Holyoke Community College, Middlesex Community College, Mt. Wachusett Community College, Northern Essex Community College, Pine Manor College, Roxbury Community College, Salem State University, Simmons College, Westfield State University, UMass-Amherst and UMass-Boston.
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, and Sallie Mae.
The FDIC's New England Community Affairs unit has been pleased to support Project Credit Smarts since its inception. All three of the FDIC's staff members have taught multiple classes and look forward to continuing to do so in the coming months. Financial education is important to individual consumers and families throughout the Commonwealth of Massachusetts. It is also a national corporate priority for the FDIC, best articulated by FDIC Chairman Sheila Bair on April 7, 2010.
"This has been a season of challenges for the banking industry and our economy. It has also been a season of challenges for consumers as they cope with protecting their money, hanging on to their homes, and trying to decide what to do next with their hard-earned cash," Chairman Bair said. "Financial literacy is vital in meeting those challenges. As President Obama has said: ‘... education is no longer just a pathway to success. It's a prerequisite to success.' That could not be more true for a financial education, made all the more urgent by the economic challenges we face today."
In its first year, Project Credit Smarts reached more than 1,500 students at 10 colleges and universities across the state. The Office of Consumer Affairs expects to reach a similar number of students this year through presentations, and makes its Project Credit Smarts materials available to all colleges in the Commonwealth through its Website.
The Patrick-Murray Administration's Office of Consumer Affairs and Business Regulation is committed to protecting consumers through consumer advocacy and education, and also works to ensure that the businesses its agencies regulate treat all Massachusetts consumers fairly. Follow the Office at its blog, Consumer Connections, and on Twitter, @Mass_Consumer.