The Credit CARD (Card Accountability, Responsibility and Disclosure Act ) Act is going to be putting a dent on college students plannig to get some financial independence once they start college.
To date, credit card companies have been aggressively marketing their plastic to college students. College students make for great credit cardholders because, one, they are purchase-promiscuous. They are up on the latest trends and, whether it be designer coffee or designer jeans, these trends almost always means spending and purchases, something that plastic is inherently perfect for. Two, college students, once hooked on plastic (and on the ensuing debt), make for long term, if not life long, customers.
Recent data from Sallie Mae shows just how bad the credit problem among college students are. Figures show that the average college student owns more than one credit card and owes large debts they have no hope of repaying before finishing college. Most college students also graduate with large debts to their name, a bad piece of luggage to have when you are out looking for a job. Why? Because employers right now are looking at credit reports as much as academic records to determine acceptable employees.
Parents are therefore going to be much relieved when the credit card bill comes into play. Unfortunately, that won't be for several months yet. In fact, this year's college opening may be the last time that credit cards are going to be very easy for students to get. Still, with the credit card bill in place, students will learn some financial responsibility, whether they want to or not.
The biggest change that the credit card bill will bring is prohibiting college students to own credit cards unless they have a co-signer such as a parent, a guardian or someone older than 21 years old who will be jointly liable for the debt incurred on the credit card. This means that the co-signer will be responsible for 100% of all debts that the credit card incurs.
Students can bypass this requirement, however if they can prove that they are financially independent enough to repay any debts he or she puts on her credit card. Of course, if a college student is already at this level of financial responsibility, it is safe to say that his or her parents hardly need to worry.
With these two conditions in place, parents looking out for their children's financial welfare can keep them away from debt for a few years more until they graduate. Hopefully, by that time, another legislation included in the bill will have sunk in enough for their children to keep away from credit card debt: educating students for financial responsibility.