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College students racking up higher credit card debt
by Elizabeth Stawicki, Minnesota Public Radio
February 26, 2004

Former college student Cheri Litsheim quit school, and is now working two jobs to pay off her credit card debt. (MPR Photo/Elizabeth Stawicki)

As tuition increases at the University of Minnesota have hit double digits in the last three years, some financial counselors say students are looking to credit cards to help pay the larger bills. But some students who use credit cards to stay in school end up quitting in order to pay off mounting debt.

St. Paul, Minn. — Former U of M sociology major Cheri Litsheim used to wonder how people got into debt maxing out their credit cards.

"Somebody told me they had $3,000 debt on their credit card. 'You're crazy, that's just stupid.' And then I got one, and now look at me," Litsheim says.

Litsheim left school largely to pay off a credit card debt that peaked at about $10,000. Now she works two jobs -- she manages an office by day and supervises restaurant deliveries one night a week. While in school, she used credit cards to buy food, rent and books when she was low on cash.

"I would use them to buy books and (thought) then in a few days -- pay them off. But then when I'd get the money I would just pay the minimum, and keep the money for other things," she says.

A lot of students were handling money fairly well. But because money was so tight, credit cards became an emergency life raft that they turned to, and were trapped. - Credit counselor Darryl Dahlmeier

Eric Hall also remembers using credit cards as a bridge.

"In some semesters it became a necessity, because the average formula would leave me short by a few hundred dollars," Hall says.

Hall, who attended the University of North Dakota and University of Minnesota, Duluth, quit school for two years to work and pay off his credit debt, which peaked at $20,000. But he found he couldn't catch up, because without a college degree he could only earn minimum wage. So Hall went back to school and graduated with a degree in physics, a field he found had few job opportunities.

The head of the research organization Credit Card Nation says Hall and Listheim have a lot of company. Richard Manning wrote a book about students and credit card debt.

"When you combine the fact that costs are higher, parents can't help the way they used to, difficult economy, students aren't able to save as much for school -- it's no surprise that in order to stay in school they're looking for whatever financial sources are available to them. Credit cards are the most flexible and easy to obtain," Manning says.

Manning says many students have an unrealistic view of the job and the salary they'll get after graduation. So he runs an interactive "budget estimator" on his Web site, where students can better understand financial life after college.

At the University of Minnesota, tuition -- even adjusted for inflation -- has nearly doubled in the past decade. Credit counselor Darryl Dahlmeier of LSS Consumer Credit Services says that increase has forced students who otherwise might have avoided debt to to pull out the plastic.

"What surprised us was a lot of students were handling money fairly well. But because money was so tight, credit cards became an emergency life raft that they turned to, and were trapped," Dahlheimer says.

State Attorney General Mike Hatch has frequently criticized credit card companies that solicit students. Hatch says he'll propose legislation limiting what students can charge, unless they can show they can pay it back.

Steve Kietz is senior vice president of sales and marketing for Chase Manhattan Bank's card unit. He says the attorney general's proposal sounds problematic.

"There's so much diversity in the student population -- you can be 40 years old and a sophomore," Kietz says. "And to tie the school year to the credit limit really doesn't reflect the needs of the consumer, or the bank's willingness to work with consumers to create individualized situations."

When asked whether limits on student credit cards would be helpful, Eric Hall said probably not.

"My fear is that it's going to make costs go up, make college even more inaccessible to the average middle class student," Hall says. Eric Hall couldn't find a job in his science field but did find a job -- in banking.

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