Card Sharks Pay to Swim Around College Campuses

From USA Today:

Despite rising concern about college students’ debt loads, the nation’s largest four-year colleges are disclosing students’ contact information to credit card-issuing banks and earning up to millions each in annual fees by giving the banks the right to market on campus.

A USA TODAY survey reveals that each of the largest 10 universities — through its alumni or athletic association — now partners with a bank to issue co-branded cards to alumni and students. The deals exist at hundreds of colleges.

“They’re getting less revenue from state governments and looking at everything they can to raise revenue,” says the American Council on Education’s Jacqueline King.

The partnerships don’t violate any laws. But they’re facing more scrutiny because they undercut some states’ efforts to crack down on credit card marketing to students.

….. Universities can receive more than $2.5 million a year for marketing deals with one card company, says Robert Manning of the Rochester Institute of Technology. Under these deals, colleges typically give banks contact information of alumni and students. They often also give issuers the exclusive right to solicit at certain campus events.

USA TODAY’s survey also finds that eight of the 10 largest universities, all of them public, say they allow other marketers access to student contact information as well under state laws that deem campus directories public information.

Two questions: Do the universities visibly and prominently give students or alumni the ability to opt out of solicitations sanctioned by the university? Are they violating any laws if, as I suspect, they don’t?

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ALSO: USAT also has a good article about aggressive card marketing on college campuses. Given the state of financial education in elementary and secondary schools, univerisities know full well that allowing the card sharks on campus will lead to financial problems, and occasional psychological problems, for a certain percentage of their student population. But they clearly don’t care, because the money is right. Remember that the next time you hear high-minded pontifications from university officials about “academic integrity” and “putting students first.”

The article also mentions a troubling trend I was previously not aware of:

A trend by students to roll over credit card debt into student loans may also mask what seems to be lower credit card balances. Student loan debt has risen to record levels in recent years, even as credit card balances have fallen slightly.

James Scurlock, the producer of Maxed Out, a forthcoming documentary about America’s addiction to debt, says his research shows that collection agencies encourage financially troubled students to pay off card debt with other credit lines — including student loans.

Alan Brock, a 2003 graduate of Florida State University, regularly used his student loans to pay off his credit cards during college. The problems started, Brock says, his first year. He obtained four credit cards within six months, lured by the free pizza offered by marketers and the “ability to buy things I didn’t have money for.”

How can this happen? Simple: Student loans are designed to fund the entire “Cost of Attendance” (COA) at a college. COA includes tuition, fees, room, and board. If you live off-campus or with your parents, you still can borrow the “room and board” money. If you have card balances, you can use the room and board money to pay them off.

On one level, doing so is “smart,” because the student loan interest rate is much lower, and is actually zero on any “subsidized” loans while you’re still in college. But, especially if you live off-campus, where’s the money going to come from to pay for the current term’s food and rent? It’s going to have to be charged again. The cycle repeats itself. Of course we know that people usually spend more when they use credit to buy things instead of cash, so the ultimate debt balances upon graduation often end up being a lot higher than they would have been. The fact that they carry a lower interest rate is scant consolation.

And don’t forget that the charged-up living expenses incurred during the final term before graduation won’t be covered by the next term’s student loan — because there won’t be one.