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College grads hit by double whammy: huge debts, few jobs Thursday, January 10, 2002 By MARTHA IRVINE THE ASSOCIATED PRESS Christian Miller can't get a car loan and, at age 27, has returned to his parents' New Jersey home, forced back by the double load of credit card debt and student loans. Like other twentysomethings across America, he's found that graduating from college means having to face tens of thousands of dollars in debt. Some even drop out before they finish school, while a growing number are declaring bankruptcy. "It stinks," says Miller, who arrived on his parents' Livingston, N.J., doorstep on New Year's Eve two years ago. Financial experts predict this year's graduates will have an even tougher time. Never has a generation entered a recession-weakened job market so debt-ridden. "I have a negative net worth of $14,000 -- it's great!" Jessica Lopez says sarcastically. In some ways, the Lopez, 24, considers herself lucky. A senior at Florida International University in Miami, she's saved money by living with her parents and has about $2,000 in credit card debt -- "tiny compared to some people I know." Still, she's already been turned down for a small business loan to start a clothing company, even though she works a part-time job and actually owes less than the average college grad. But the average graduating University of Washington senior is no better off than Lopez, according to figures gathered by the UW student financial aid office. The average student loan debt carried by last year's graduating class at the UW was $14,850, says Kay Lewis, director of the UW student financial aid office. And that does not include credit card, mortgage and other types of debt. The federal General Accounting Office says students are graduating with an average of $19,400 in student loans. Average student credit card debt rose from $1,879 in 1998 to $2,748 in 2000, according to the student loan agency Nellie Mae. It is the growth of the latter statistic that has financial experts most worried, especially since bankruptcies filed by those under 25 grew to a record 94,717 in 2000, according to a Harvard Law School study. A third of students have four or more credit cards, picked up everywhere from phone solicitations to the Internet. And some universities have signed deals with credit card companies, giving them exclusive rights to market on campus and use school logos on their cards. Delaware-based MBNA American Bank has such deals with about 600 colleges and universities, with about half a percentage point of interest earned on the cards going to the schools. The company says it targets alumni and upperclassmen, keeps its lines of credit at $1,000 or less and offers campus seminars about responsible credit card use. "The last thing we want to do is give a college student a credit card (when) they can't handle it," says MBNA spokesman Brian Dalphon. Officials at Capital One, another major credit card provider, offer a "high school credit card" to teens, 16 to 18, who get the card guaranteed by a parent or guardian. Diana Don, a spokeswoman for the Virginia-based company, says parents use the cards to teach their children how to be responsible before going to college. But some are wary. "Marketing credit cards to young people before they have the experience to understand what the ramifications are can have some pretty devastating consequences for them, especially with increasing reliance on credit reports," says Robert Pregulman, executive director of WashPIRG, a Seattle-based consumer advocacy group. Increasingly, young people find themselves denied jobs, rental housing and insurance, based on credit reports, Pregulman says. Ruth Johnston, assistant controller of student fiscal services at the UW, says her office has been offering free classes to freshmen, and even middle school students, on managing their finances, with a heavy emphasis on credit cards. Bob Doyle, of the American Institute of Certified Public Accountants, says students should be learning about financial responsibility from their parents well before buying on credit. He advises parents to lend money to their teenage children, and then make them find a way to pay it back. Too often, he says, parents forgive loans or continually bail out their children. "That is doing more harm than good," Doyle says. Sandie Rosko, manager of the UW office in charge of collecting debts from current and past students, says her office is focusing on educating students against taking out a larger student loan than they really need. "You're a freshman, you come to the university, you find out you're eligible for a loan of $15,000. Are you educated enough to say that's wonderful but I don't need $15,000, I need $6,000?" Rosko says students have more credit card debt than they used to. Those already in debt and graduating into a recession may have to learn some tough lessons. "Before, many students were using signing bonuses (for taking jobs) to pay off their credit cards," says Robert Manning, author of the book "Credit Card Nation." Now the signing bonuses are gone -- and in many cases, so are the jobs. And then there are those still saddled with debt from years ago, including Miller. He's keen to move out of his parents' home but still has about $4,000 in credit card debt. Desperate to pay it off, he's even made two trips to Atlantic City casinos. That's not a move financial planners would recommend, but he won $1,000 each time. "And it goes straight to the credit card bills," he says.
