Big Debt on Campus

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. Tuition is rising everywhere, and 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.

In particular, credit cards can deeply affect students' financial lives, both in college and afterward. As the National Foundation for Credit Counseling points out, "Providing an 18-year-old with little financial training access to a credit card is not only risky, it could be downright disastrous."

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 and in some ways necessary. Certainly, mixing a keg stand with hazing isn't the healthiest thing you can do, 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. But in college, 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
At the Fool, we've turned our attention to financial literacy via our philanthropic initiative, Foolanthropy. In the past, our annual Foolanthropy campaign has focused on collecting community donations. This year, our approach is a little different: We're rolling up our sleeves and focusing on volunteerism. We're partnering with local public charter school Thurgood Marshall Academy, where we'll take advantage of various volunteer opportunities as well as teaching financial literacy workshops to students on the brink of their college careers.

How you can help
We hope you'll be inspired by our Foolish calling to volunteerism, and lend a hand in your own community. As President Obama said in a recent university commemoration: "The need for action always exceeds the limits of government." 

Also, there's a way for you to partner with us -- for every article comment on Fool.com during the campaign (Nov. 25 through Jan. 8), we'll donate $0.10 to Thurgood Marshall Academy, up to $20,000.

So please, use this opportunity to discuss the importance of financial literacy, volunteerism, and the ways you're giving back to your own community. We'd love to hear what you have to say.

This article was originally published Jan. 20, 2007. It has been updated by Claire Stephanic, who does not own shares of any of the companies mentioned, though she does own a credit card or two. American Express is a Motley Fool Inside Value selection. The Fool has a disclosure policy.