Credit card companies will no longer have the run of campuses

Consumer advocates say the reining in of student credit card sales can’t come soon enough. In a study by Sallie Mae, the student loan organization, college students who had applied for student loans had an average of 4.6 credit cards in the spring of 2008, with the average senior graduating with $4,100 in credit card debt.

“College students have been a key target of the credit card industry,” said Ed Mierzwinski, consumer program director at U.S. PIRG, a Washington-based consumer organization.

In February, a host of changes will hit campus. The law will:

● Allow consumers under 21 to get credit cards only if a parent or other adult co-signs or if they prove they have the independent means to repay credit card debt.

● Require disclosure of agreements that authorize collegiate affinity cards, including the details on royalty payments and mailing lists.

● Prohibit card issuers from offering freebies like food or trinkets when marketing on campus.

● Stop prescreened credit card offers for consumers under 21 and ban credit limit increases without permission of a parent or other co-signer.

While many credit card companies have already scaled back aggressive on-campus marketing, consumer advocates say they will be monitoring colleges this fall. “I am concerned that banks may go out on one last fling before graduation, if you will,” Mierzwinski said.

In advance of the new law’s disclosure requirements, The Atlanta Journal-Constitution requested copies of affinity card agreements of the University of Georgia, Georgia Tech and Georgia State University.

The Georgia Tech Alumni Association described its agreement, but refused to release the contract saying it was a private organization not subject to the state open records act. The University of Georgia Foundation released a copy of its agreement but redacted details. Georgia State released its agreement.

Joe Irwin, chief executive of the Georgia Tech Alumni Association, said the Tech card is marketed mainly to alumni. But he said the agreement authorizes the release of student names and addresses and allows some on-campus marketing to students.

Irwin estimates proceeds from the agreement bring in about 10 percent of the association’s annual $6.5 million budget. “It’s a great program that has helped fund our mission,” he said.

UGA provides Bank of America with names, addresses and phone numbers of students, alumni, parents, UGA season ticket holders and donors, according to the contract. The foundation promised to supply at least 180,000 names. The agreement authorizes on-campus marketing through information tables and posters.

The seven-year deal with Bank of America produces a hefty return: a guaranteed $1 million a year in royalties evenly split by the University of Georgia’s alumni association, athletic department and the Arch Foundation, according to Arch Foundation documents.

Tom Landrum, the University of Georgia’s senior vice president for external affairs, said the program is supported mostly by alumni cardholders. But he said the school is very comfortable including students. “We think our licensing partner has taken a responsible view toward offering products to students, just like they have to non-students,” Landrum said.

The Georgia State University Alumni Association’s agreement with Bank of America isn’t as lucrative as the UGA deal. Georgia State’s association is guaranteed royalties of at least $525,000 by the end of the contract term in 2014. The royalty formula calls for the bank to pay $1 for every new account and 1/2 percent of the value of retail purchases on non-student accounts. For student accounts, the association gets slightly less.

Most consumer advocates don’t question affinity cards for alumni. But some oppose the offer for students, especially since most alumni associations refuse to reveal contract terms.

Bank of America said students aren’t the primary targets for collegiate affinity cards. Ninety-eight percent of cardholders are alumni and fans, said Betty Riess, a bank spokeswoman.

She said cards extended to students generally have more forgiving terms, such as lower late fees and no rate hikes for late payments.

But the Georgia State contract suggests all terms are not more favorable. The agreement calls for an annual rate of 15.99 percent for students and 9.99 percent for alumni and others.

The new reforms are aimed at keeping students from accumulating more credit card debt than they can handle. The changes are likely to make it more difficult for consumers under 21 to get credit cards, said a spokesman for the American Bankers Association.

Updated statistics about credit card debt among all college students are scarce.

The private research firm Student Monitor reported that about one-third of college students have credit cards in their own names. The average balance for those who do not pay off their cards each month is $452, according to the firm.

A 2008 study by U.S. PIRG, the consumer organization, found that two-thirds of college students have credit cards, with the average senior running a balance of $2,623.

“Many students are behind the eight-ball once they graduate,” said Samuel T. Jackson, president of an Atlanta-based nonprofit that offers financial literacy training for students. “They have so much student loan debt and a lot of students, because they can’t get loans, are using credit cards to pay for tuition and books.”

Suzanne Boas, president of Consumer Credit Counseling Service of Greater Atlanta, said parents need to help their kids learn to manage money before they head off to college.

“Having these discussions at age 18 on Sept. 4th is way too late, about four years too late,” Boas said.

She also encourages parents paying a child’s tuition to transfer the money to the student’s account and require the student to write the check.

“It really helps students have an understanding of the cost,” she said.

Boas recommends that college students have credit cards to deal with emergencies. But she said the credit limit should be no higher than $1,000. If a student spends with abandon, she advises parents not to pay off the card.

“Small mistakes you can learn from are very important in life,” she said.

Katrina Walker, a Spelman College student, got her first credit card from Macy’s where she worked in high school. Capitol One offered her a card when she turned 18 and she accepted that, too.

“I started getting offer after offer from different companies,” said Walker, who is now 23.

Walker grew up in foster care in California and was living on her own, working and going to college part-time. It didn’t take long to amass $30,000 in debt on her credit cards and car loan. “I went from one credit card to the next, thinking I can manage my money and survive,” she said.

When Walker lost her job, the debt crushed her. She lost her apartment and her car was repossessed. She moved into a YWCA facility for former foster children and eventually paid off all of the card debt.

“It still feels good to know I don’t have that many bills,” she said. “That experience has just made me more grounded.”

To Walker, the new law makes sense. “It takes responsible young people to be able to handle a large amount of debt,” she said

Walker said she has taken on student loans to attend Spelman, but no longer has any credit cards. And that suits her just fine.

“Debt is not worth it,” she said.

Spotlight columnist Alison Young will return soon.