The Crackdown on Student Credit Cards

Last Updated May 25, 2009 3:45 PM EDT

During the start of every school year, credit-card marketers have shown up on college campuses loaded with bling. Their goal has always been to entice college students to sign up for a credit card by offering them a free pizza, towel or a flimsy t-shirt made in some Third World country.

The cheap giveaways have often worked. It's right here that you could insert an analogy about babes and woods.

Happily, this assault on naive college students is about to end. While there's been considerable press about the potential fallout from the Congressional passage of the credit cardholders' bill of rights, there's been little attention focused on what this means for college students. Here's the bottom line: it's going to be much tougher for a college kid to overdose on plastic.

Thanks to the new law, college students under the age of 21 will have to find a co-signer or demonstrate the ability to repay their debt before they can obtain a credit card. Without a co-signer, a college student will be limited to plastic debt of $500 or an amount that doesn't exceed 20 percent of his or her yearly gross income, whichever is greater.

I hope these tougher standards will help protect students from themselves. According to a recent study by Sallie Mae, the huge student loan lender, the average college student carries a balance of nearly $3,200 on credit cards. And this statistic is even more alarming: by graduation, one out of five of these collegiate borrowers owe more than $7,000.

Do students need to fret about this crackdown on collegiate credit? Not really. For kids who worry that they need to establish a credit history, there is no rush. They should wait until senior year in college and then cajole a parent into becoming a cosigner. Until then they should just use a debit card that's linked to a checking account. Paying by cash is a better way to go anyway.

Too Much Credit Image by Andres Rueda, CC 2.0.