FTC in New York and John Jay College Teach Credit Smarts to NYC Students

Students Challenged to Take the Credit Smarts Pledge

New York, NY – The Federal Trade Commission’s Northeast Regional Office and John Jay College of Criminal Justice of the City University of New York are teaming up to announce “Project Credit Smarts 2003” – their latest initiative to educate students about responsible credit card use – at a press conference on Thursday, September 4, 2003 from 10:00 to 10:30 a.m. at John Jay College, located at 899 Tenth Avenue in Manhattan (between 58th & 59th Streets), room 630T. In a move to capture the attention of students, the FTC will unveil its new Credit Smarts Pledge, the details of which will be announced at the press conference in English and Spanish.

Over 875,000 students attend the New York City metro area’s colleges and universities – over 190,000 as freshmen. Many of these students are not familiar with using credit cards wisely. Due to the great demand, the FTC – in partnership with John Jay College – is expanding “Project Credit Smarts” – a crash course for freshmen and other students on how to avoid credit card problems and debt. In the past year, the FTC has contacted over 210 area colleges and universities and provided them with educational materials and speakers to teach “Credit Smarts.” At John Jay, the FTC staff teaches Credit Smarts to incoming freshmen and distributes the FTC’s ABCs on using credit in the freshman orientation mailing and in every book in the campus bookstore.

Credit card companies actively market to students aged 16 to 18, and most students have never owned a credit card. According to the most recent study by Nellie Mae, a national student loan financing organization, 83 percent of undergrads have at least one credit card, and the average credit card balance for college students is $2,327. Nellie Mae also reports that students double their average credit card debt – and triple their number of cards – by graduation.

Ana, a student at John Jay College, says her easy access to credit cards resulted in mounting debt. “At first I resisted,” Ana says, “I was told that it would cost only $10 a month to pay it off and I was put down as making $13,000 a year. At the time, I was getting $40 a month for my allowance, so I figured I could afford it.” Ana was not able to meet the $65 minimum monthly payment with the money she set aside, and before long she had accumulated approximately $2,000 in debt. With her part-time job, she has paid off $1,350, but with about $700 to go, she regrets, “now I get a check and I don’t even get to enjoy it.”

“Credit cards are a student’s double-edged sword -- useful to pay for school necessities, yet a hazard for those who are not credit savvy,” says Barbara Anthony, the FTC’s Northeast Regional Director. Anthony advises:

• Resist “free” gifts as a reason to sign up. Many card issuers charge an annual fee of $15 to $55 which can easily offset the value of the gifts.
  
  
• Look carefully at the terms of the transactions. Many cards are offered with low “teaser” rates, which go up quickly. Know the details of the program you are signing up for.
  
  
• Understand how interest works. If a student charges $2,000 on a card with 18.5 percent interest, and pays a low minimum monthly payment, it would take over 11 years to pay off the debt and cost an additional $1,934 just in interest -- almost double the cost of the original purchase.

Many schools now offer the option of paying for tuition using a major credit card. More and more students are using online registration, facilitated by a credit card. According to Dr. Roger Witherspoon, Vice President for Student Development at John Jay College of Criminal Justice, “The current trend, across the country, is that colleges and universities are finding it necessary to increase tuition costs. However, the availability of financial aid is remaining at the same level and in some cases it is even declining. The natural result of this phenomenon is that students will increasingly need to borrow more in order to achieve their academic goals, but they are borrowing over their heads and creating debts that are unmanageable.”

According to Nellie Mae’s 2002 National Student Loan Survey, 27 percent of college students report that they used credit cards to finance their undergraduate study. “Nellie Mae’s goal in publishing its credit card study is to underscore the importance of educating college students about using credit effectively, weighing their spending decisions, and considering their source of borrowing,” says Nina Prikazsky, Vice President of Operations for Nellie Mae.

The FTC’s toll-free Consumer Hotline is available for further assistance at: 1-877-FTC-HELP (382-4357), or visit the FTC’s Web site at www.ftc.gov.

FTC Media Contact:

Cindy Kapadia or Michelle Stolls
(212) 607-2807 or (212) 607-2834

Staff Contact:

Barbara Anthony
FTC NERO - New York
(212) 607-2828

John Jay College Media Contact:

Jerry Capeci
(212) 237-8628

Consumer Information:
Getting Credit