Big Debt on Campus

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Quick poll: Raise your hand if you weren't broke in college.

I thought so.

Of course, "broke" means something different to everyone. Depending on your circumstances, we could be talking about eating so much ramen you were at risk for developing scurvy by semester's end, or we could be talking about having to scale back your spring break plans from the Riviera to Cancun. (If this was you, I don't want to hear about it.) Wherever you were on the spectrum, though, it's a good bet you didn't have a lot of disposable income. Somehow, college students never do.

Enter credit card companies.

It's really expensive to be a college student. (Books alone can cost upward of $1,000 a semester.) Credit card companies know this, and they market aggressively on campuses. And there are a lot of opportunities for students to make financial mistakes -- a lot more than there are opportunities to learn about how to avoid them.

I'm not suggesting that the major credit card companies like Visa (NYSE: V) and American Express (NYSE: AXP) are evil. I'm not saying that Citigroup (NYSE: C) and JPMorgan Chase (NYSE: JPM) should stop issuing credit cards. It's just that what makes them good businesses can also result in debt-strapped consumers.

A 2007 article from CNN.com highlights just how deeply credit cards can affect students, both in college and afterward. The article quotes Shalonda Jones, a representative of the National Foundation for Credit Counseling, as saying too many college students go off to school without understanding finances: "We all know when you're away from home with a little freedom and money, students tend to take that freedom and lose their heads."

Many of us know very well that the freedom college brings can lead to the occasional stupid decision. Keggers and hazing immediately come to mind. This is normal, necessary, and even healthy. Well, maybe not mixing a keg stand with hazing, but making some mistakes during young adulthood is part of growing up. The key is to make sure that you're not paying for those mistakes years or even decades later.

Let's say at 21 years old, you max out a credit card on trips to the mall and your local bar. You never pay it off, and your credit score takes a big hit. Do you realize that by the time you're 30, your chances of being approved for a home loan, an auto loan, or even a job might suffer because of that youthful mistake? (Lots of employers check credit these days.) You probably don't even think about it.

One way college students can control debt is to get a credit card only if they have a job, even if it's only part time. This is one way to ensure that there's some money coming in to at least help balance the money going out. Another good way to avoid such pitfalls would be to make sure college students get a solid education in financial literacy. While this is, unfortunately, unlikely to become a required subject at most schools, the Fool is dedicated to helping remedy the situation.

What we're doing
Our annual Foolanthropy charity drive is now in its 12th year, and we have focused our efforts on the issue of financial literacy. With our partners, we are dedicated to ensuring every young person reaches adulthood with a solid understanding of financial matters.

This year's campaign, which supports a wonderful charity called DonorsChoose.org, ends tonight. If you are able to, even a small donation -- $10, $20 -- can help the cause. With DonorsChoose.org, you can pick the project you want to support and the amount you'd like to give. Teachers who are focused on financial literacy outline the materials they need to help their students achieve their goals, and through your donations, you can be a part of them -- everything from giving money-education kits to low-income kids to providing a notebook computer for Bronx high-schoolers to polish up their math skills. So far, 2,830 students (45 classrooms) have gotten help.

Click here to check out the campaign, and see how the generosity you display today could lead an entire generation of college students toward investing in MasterCard -- and away from maxing one out.