As you might imagine, a very big item on the list of debts I help clients put together when I’m helping them prepare for the bankruptcy court process is “plastic”, meaning past due and overextended credit cards and debit cards. In fact, as I brought out in Will You Have Debit Or Credit With Your Meal?, with the fall in home prices combined with rising medical bills, food bills, and fuel prices, more and more people have gotten into financial trouble by using plastic to pay these everyday costs. But if you thought the plastic problem was limited to the unemployed or lower income families and individuals, think again. In many cases, the roots of the financial problems leading to my bankruptcy law offices trace all the way back to the college campus.
A survey by student lender companies shows the average college grad carries close to $3,000 in credit card debt, with one in four having more than $5,000 in debt. This is in addition to student loans (remember, these young folks haven’t, in many cases, even begun to work!). College administrators have started paying attention to the problem, and have countered by setting rules about the marketing of credit to students on campus. So, the newest tactic has been for companies (Walmart and Bancorp, for example) to sell “prepaid debit cards” to students. While a typical debit card links to a checking account, the prepaid cards don’t. However, these cards tend to have high fees and less protection against theft or loss than credit cards. In addition, prepaid debit cards don’t help students establish a credit history.
Don’t get me wrong – I understand parents need to find convenient ways for their students to pay everyday expenses, and the students need to have practice handling money. It goes without saying that the college-educated will have greater job opportunities than those students who enter the work force directly from high school. It’s just that, as I counsel folks in my bankruptcy law offices around the state, I see people struggling under massive debt burdens that literally go back decades. What makes things so much more difficult, as I explained in More Government Help With Student Loans, it’s almost never the case for student loans to be dismissed by a bankruptcy court.
A college education can be a key to a successful career, providing opportunities to qualify for the newer, technology and life sciences kinds of jobs. But, seen from my vantage point as a bankruptcy attorney in Indiana for more than twenty years, parents and college officials need to make sure Managing Money 101 plays an important part in the education of our young people!