Campus finance offers evolve
Campus finance offers evolve
College students returning to campus this fall face a serious economic downturn, and for those preparing to graduate and enter the working world, debt accrued from student loans and credit card use will likely be a major worry.
Many of these debt problems have been linked to soaring tuition costs, overuse of credit cards and high interest rates. Financial services providers have also been accused of aggressive marketing tactics that can easily overwhelm new consumers and saddle them with unwanted terms and fees.
“We're seeing young people, on average, graduate with $3,000 in credit card debt, and that's typically on top of the student loan debt that they [also] need to repay,” said Christine Lindstrom, higher education program director of US PIRG, which is the federation of state Public Interest Research Groups (PIRGs). “The credit cards have terrible terms and conditions and all sorts of ‘gotcha' fees.”
The public, increasingly concerned about potential debt problems, has placed financial marketers under more intense scrutiny — sometimes demanding revised tactics. A recent push for more responsible marketing came from New York State Attorney General Andrew Cuomo, who reached an agreement with eight student loan companies on September 9 requiring the companies to adopt more stringent guidelines.
The agreement, which followed a nationwide investigation into loan companies' marketing practices, bans logos and return addresses that make offers appear as though they are from the federal government. Fake checks, false rebate offers on current loans and enticements such as iPods and gift cards are also banned, and lenders are barred from advertising interest rates that are not available to most borrowers. Seven of the companies will also pay a total of $1.4 million into a fund for educating students and their families about the financial aid process.
“These settlements are a major step forward in cleaning up an industry where false and misleading advertising practices have been all too rampant,” Cuomo said in a statement. “It's time for the companies to be held accountable.”
Companies need to be clear and concise when communicating with consumers, added Karin Pellmann, VP of PR for MRU Holdings Inc., a loan company that was not under investigation, but voluntarily adopted Cuomo's new guidelines. “Student loans can be complex, and the better quality information that's out there, the better for consumers,” she said.
Credit cards have also been linked to student debt woes. A recent report, The Student Market for Credit Cards: Issues and Trends, released by research firm Kaulkin Ginsberg, noted that more of this year's college seniors will face financial struggles upon graduation due to higher student credit card debt than in previous years. To counter the toll of these debts on college students, some major universities have restricted on-campus credit card marketing.
Consumers are also taking more debt responsibility on themselves. Mint.com, a year-old online personal finance tool, recently added student loan tracking to its site so users can track their payments. The company promoted the new feature on its site and on college campus sites.