Students and Credit: MSU Part of National Study

Students and Credit: MSU Part of National Study

Kris Tilker, Midwestern State University's professor of Legal Studies and Business, has published research papers in national and regional law reviews and business journals for years, but few of those papers have received as much attention as a project he participated in with fellow undergraduate law professor Marty Ludlum from the University of Central Oklahoma.

Ludlum recruited volunteers to take part in a study on college students and credit cards, and Tilker agreed to distribute a survey to MSU business students in the fall of 2009. The results of the survey, "Financial Literacy and Credit Cards: A Multi Campus Survey," were published earlier this year in the International Journal of Business and Social Science, and received nationwide attention from business media outlets. The news was not good.

The surveys, circulated among business students at MSU and four other universities, asked about personal credit card usage, minimum payments, interest rates, and late fees. Survey results show that the average credit card debt for college students has gone from $946 in 2004 to $4,100 in 2009; 50 percent of college students have four or more credit cards; and student loans plus credit card debt average $20,400 for college graduates.

Tilker said one factor in the sharp rise in student credit debt was the heavy marketing by credit card companies toward the 18-21 age bracket beginning in the early 2000s. The credit card industry wooed this untapped market with free gifts, low introductory rates, and little or no income or employment requirements.

Other survey findings include:

1. Very few students relied on credit cards for funding college tuition but most say they would use credit cards to purchase books or supplies.

2. Fewer than 1 in 10 students paid their credit cards in full each month. Therefore, most students are left with high interest rates and other charges on their unpaid balance each month.

3. Fewer than 1 in 10 students knew their interest rate, the late charges, and the overbalance penalty on the credit cards they use.

4. Students who had taken business law and/or ethics course were significantly more aware of interest rates and late fees.

5. Younger students use credit cards more often than older students.

6. Employed and married students showed much more knowledge about credit issues such as interest rates, late fees, and over balance fees.

The survey also suggests that the student problem with credit explains the larger national problem with credit usage. "These results should serve as a wakeup call for both our college students and our college outreach efforts into the community to train people about the costs of credit," the findings state.

Survey findings conclude, "It is clear the status quo of financial literacy is a failure. à To ignore the problem is to promise another generation of credit users who will be buried in high interest rates and fees which they may not ever be able to pay."

Tilker said that the results show there is a dire need for more basic consumer-oriented information for college students. "Students without financial literacy will struggle with resources which may impede their chances of completing a college degree," he said. "Colleges should be actively involved in outreach efforts to train students about costs of credit." Tilker said that MSU always includes a consumer credit counselor speaker in its Introduction to Business Class to impress on students the costs of credit cards.

Other efforts to promote financial awareness at MSU include a financial success program as part of the Student Success Series sponsored by Student Development and Orientation. During the program, students have the opportunity to learn about credit card use, banking, debt, interest, investment, and making the most of their money. Student Development Director Matthew Park said that although in the past attendance was lower at sessions where the topic was finance, it would continue to be part of the Student Success Series because of the importance in teaching financial responsibility.

Student-athletes must attend life-skills seminars each semester where Coach Jeff Ray said that they learn "the good, the bad, and the ugly" of credit and money management, along with other skills such as time management.

Assistant Housing and Residence Life Director Angie Reay said that money management programs are routinely scheduled for students living in the residence halls, including some taught by personnel from Well Fargo Bank, who have presented programs on financial responsibility and assisted students in opening bank accounts.

Other institutions participating in the study were the University of Central Oklahoma, Texas A&M, University of Texas at Tyler, and Framingham State University in Massachusetts.

For complete survey results, visit