Royal Purple

Issue date: 9/5/07 Section: News

Media Credit: Rose Wolf The national average student debt in America is more than $2,700

U.S. Senator Herb Kohl, D.-Wis., has introduced new legislation that would protect college students from amassing credit card debt by requiring providers to adhere to strict lending practices.

The Student Credit Card Protection Act would require credit companies to verify the annual gross income of full-time students younger than 21, as well as require a parent or guardian to co-sign if a student has no verifiable income. The act would also limit the amount of credit issued to students and ban companies from issuing multiple credit cards.

The act comes at a time when college students nationwide are facing an average credit card debt of $2,700 or more.

"I'm not surprised from what I've seen," said Denise Kaminski, Branch Manager of the UW Credit Union in Whitewater. "Students can accumulate high balances before they realize what they've gotten themselves into."

If a student has a credit card bill with a balance of $1,000 and only makes a minimum payment of $25 per month, it will take them nearly 10 years to pay off the card, and they will have accrued almost $600 in interest.

Credit card debt affects an individual's credit score and making late payments, or not making the minimum payment will cause the score to drop drastically. Late payments are a strong indicator of risk, and they have an enormous impact on credit scores.

"More and more places are looking at it as a total picture," Kaminski said. "Employers are checking your credit score to see how responsible you are with your credit. It's extremely important for students to pay attention to their credit and maintain a good credit history."

According to student loan company Nellie Mae, 44 percent of undergraduate students said they made more than the minimum payment but generally carry forward a balance; while 11 percent said they made less than the minimum required payment each month. Students from the Midwest also had the highest balances in the country.

To avoid the pitfalls of debt, students can follow several tips to maintain a good credit history. First, if carrying a balance on a card, make sure to pay it and pay it on time, even if it's only the minimum amount.

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