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Legislators tackle student debt

Legislation? Education? A ban on solicitation?

A small group of state legislators is debating such options in trying to combat the scourge of student credit card debt at Virginia colleges and universities.

"There is an issue of irresponsibility among financial institutions in offering credit to people who are not credit worthy," said Del. Dwight Clinton Jones (D-70th), a member of the Joint Subcommittee Studying the Status and Needs of African-American Males in Virginia.

The main purpose of the Subcommittee is to investigate issues that hinder the progress of all black, male Virginians.

But three years ago when Subcommittee members started looking into the issue of credit card debt among black, male students they saw that not only black males, but Virginia students of all races and genders were saddled with debilitating debts.

Despite agreeing on the larger problem, Subcommittee members differ on what should be done to solve this issue of student debt.

Jones said he believes a need exists for legislation to curb aggressive credit card marketing on public college campuses.

"We don't need to play a part in getting students in debt before they even start their lives," he said.

But Del. Dave Albo (R-42nd) said such intervention is not necessary.

"People in college are smart enough to get into college -- they should be smart enough to manage their own finances," Albo said. "I'm against anything that would restrict the business."

Getting more information

State senators and delegates now are obtaining more information on credit card debt through a series of public hearings, the most recent of which will be held today in Newport News, and through the research of four state agencies.

The Bureau of Financial Institutions, one of the state agencies involved, has engaged representatives from credit card companies in the debate.

Officials from the finance companies MasterCard International, Household International and Capital One are members of the House Joint Resolution 735 Workgroup, which will issue a report on student debt to the Subcommittee.

HJR 735, the bill that asked the four agencies to examine the role of credit cards on college campuses, was the trigger for the Workgroup's research project.

The findings will be available in December.

All three finance companies involved issue or sponsor credit cards marketed directly toward college students.

Company representatives say that rather than restricting credit card companies from soliciting on campus, the way to avoid debt problems is to improve financial education, perhaps even before students get to college.

The workgroup is "trying to maybe even go to the high school level and educate the students towards good finances," said Noel Pearlman, marketing manager for Household Credit Services, a division of the Household International company.

Bureau of Financial Institutions Commissioner Joseph Face, a member of the Workgroup, said Virginia secondary schools already have the infrastructure to increase personal financial education for students.

For example, one of the Virginia Standards of Learning for 12th graders is "the student will evaluate the effect of monetary and fiscal policies on personal economic well-being including employment opportunities, purchasing power, credit and interest rates, and opportunities for investment and savings."

The Virginia Standards of Learning outline academic goals for public school students at various grade levels.

Companies: part of the problem?

Some say the credit companies themselves may be part of the widespread credit debt problem, because of their sometimes aggressive marketing techniques targeted specifically at college students.

"We would certainly not recommend that credit card companies be banned from campus but they should take a look at how they market on campus," Face said.

Representatives of credit card companies admit that their marketing techniques, such as awarding free gifts to students who apply for cards, are sometimes seen as a problem.

"People are signing up for credit cards because you get a free t-shirt for signing up -- they think we're trying to suck in the students," Pearlman said.

But solicitors from his company, Household International, hand out an educational pamphlet on how to maintain good credit along with that t-shirt, he said.

Still, University officials strongly discourage credit card solicitation on Grounds. Most card companies are prohibited from marketing in any student activity areas, including Newcomb Hall and its surrounding areas, the Student Activities Building, the lower level of the Lawn and the Amphitheater, Newcomb Hall Director Eddie Daniels said.

The lone exception is American Express, which is permitted to market cards near the University Bookstore because their affiliate company, Market Source, is an established vendor of the Bookstore that distributes student trial packs and other items, Bookstore Director Jonathan Kates said.

However, at times student organizations solicit credit card applications as a fundraiser -- companies pay the student solicitors for recruiting new cardholders, Daniels said.

While this practice is legal, he said University officials discourage it to maintain the integrity of the academic environment and to avoid providing access to some companies and not to others.

The industry educates

In addition to Household International, many other credit card companies have launched educational efforts aimed at reducing student debt.

MasterCard International teamed up with the United States Student Association, a group that lobbies for student rights, to produce a series of educational materials entitled "Are You Credit Wise?" this August.

The materials are intended for use in college settings, such as dorm meetings with resident advisors, said Catherine Cummings, MasterCard International vice president of consumer affairs.

Discover Card is publishing a booklet that discusses using credit responsibly, as well as broadcasting a nationwide commercial that reveals the consequences when "a kid goes crazy with credit," spokesperson Cathy Edwards said.

WellsFargo, a bank that markets a student MasterCard in the Western U.S., has both online educational materials for its student cardholders and a monthly educational newsletter, WellsFargo Cards Services Spokesperson Jon Ferchen said.


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