As a student at Columbia University business school two years ago, "Diane Edison" received one or two credit card applications in the mail each week.
With an undergraduate degree and a year of full-time work under her belt, she carried only an American Express card.
"I wasn't interested in any more credit cards until graduate school," said Ms. Edison (not her real name, which she asked not be used in this article). "That's when my income plummeted, and my expenses increased dramatically."
She signed up for a Wells Fargo Visa card with a $500 limit and a Visa Gold from Bank of New York, with a $5,000 limit, while working a part-time job.
The limit on the Wells card gradually grew to $7,500, she said.
"By the time I had left school, my balances were around $9,000."
From a card marketer's perspective, Ms. Edison was ripe for the picking. Signing them up as students, the thinking goes, can lead to profitable, lifelong relationships.
Anecdotal evidence suggests this tactic may be backfiring, with more and more student cardholders paying late or not paying at all, and thus contributing to the overall rise in delinquencies and chargeoffs.
As more students struggle to meet minimum payments as low as $20 a month, collection agencies are dealing with big increases in credit card chargeoffs.
At the end of the second quarter, 3.7% of all credit card payments were at least 30 days overdue - the highest level since the American Bankers Association began collecting the data in 1974.
In addition, personal bankruptcy filings have tripled since 1981, despite the outwardly healthy economy. Visa U.S.A. and others who track economic statistics expect these filings to top one million this year.
Meanwhile, card issuers seem to be taking heed. A survey by BAI Mail Monitor, a market research firm in Tarrytown, N.Y., shows card solicitations have dropped from a high of 723 million in the first quarter of 1995. Issuers sent 658 million card solicitations to customers in this year's second quarter, 16 million less than in 1995's.
Still, an 18-year-old freshman at a private college in Marietta, Ohio, can receive as many as 15 preapproved credit card applications in the mail.
That's what happened to Dorothy Horvath's son. "The letters that accompanied the applications asked him only to confirm his address, Social Security number, date of birth, and college," she said.
"If he had signed up for these credit cards, he would have had about $20,000 of unsecured credit available, with no previous contractual credit history, no counseling, and no ability to repay."
Many card issuers allow applicants to list scholarship funds or stock holdings in lieu of co-signers or proof of employment.
Issuers also tend to approve student applications more quickly than other applicants, said Mark Queen, vice president of card research at Payment Systems Inc. in Tampa.
"They are relying more on the fact that these students do not have any bad credit, rather than how many good things are on their record. Initially, issuers felt that college students were more conscientious, but a lot of times the parents ended up paying the bills to keep their children out of trouble," the researcher said.
Yet a significant number of credit cards are acquired by students who do not have anyone to supplement their payments.
"The pressure on credit card issuers to get more accounts on the books probably forces them to extend unsecured credit to students who don't deserve it to begin with," said Michael G. Noah, president of Management Adjustment Bureau, a Buffalo collection agency.
Rising education costs and living expenses have forced these students to rely on credit cards more as a source of income than as a convenient payment tool.
"It used to be that if you were a college student, you were just broke and nobody expected you to be able to go on trips or have nice dinners," said Ms. Edison, still struggling under $45,000 of total debt - $13,000 of which can be attributed to credit cards. "But now credit cards are so easy to get and so easy to fall back on in a college environment that is so high maintenance."
Payment Systems estimates there are 12 million to 15 million undergraduates in the United States. Research conducted by Roper Starch Worldwide Inc. in 1995 showed 64% of college students had a credit card - up from 59% the previous year and the highest level since 1991. In addition, 20% of students had four or more credit cards.
At Long Island University's Brooklyn, N.Y., campus, issuers set up tables to market cards year-round, said Bernadette Young, a recent graduate.
"The average credit limit per card offered is $1,000, and many students use them for entertainment expenses and to purchase clothes," said Ms. Young. "When the bills got too high, some of my friends just paid the minimum payment or stopped paying entirely."
In sharp contrast, Ms. Edison's alma mater, Columbia in New York, does not allow credit card issuers on campus. Issuers are only allowed to advertise on the sidewalk outside.
"We haven't heard any complaints from students," said Robert Nelson, a spokesman for the university. "But we had the perception that it was a safer bet to restrict access to the campus."
Glinda Bridgforth, president of California-based counseling service Bridgforth Financial Management Group, said, "Whether or not the issuers are on campus, students will continue to find them."
For example, all of Ms. Edison's applications came by direct mail. "I don't think the credit card disclosure information is spelled as clearly as it could be for college students, and for older people as well," said Ms. Bridgforth.
"They are so excited about being able to get the card that they do not read the fine print."
According to Consumer Credit Counseling Services, if you have a $5,000 debt with an interest rate of 18% but pay only the minimum monthly payment, it will take 22 years to repay it, at a total cost exceeding $6,900.
Collectors say there are holes in lenders' credit policies for the student market.
Management Adjustment Bureau reports that moreof its delinquent accounts can be traced to foreign students who drop out of school and return to their home countries, leaving behind unpaid debts.
The collection agency "received an extra $30 million from credit card chargeoffs related to college students so far this year. That's an increase of 10% in losses from the same period last year," said Mr. Noah.
"These students didn't even have part-time jobs, and in some cases the issuers did not run any collateral checks," he added. "You wonder how they analyzed the students' ability to repay their debt."
Though student delinquency rates tend to be slightly lower than the industry average, signs point to an increase over the past year, said Mr. Queen of Payment Systems.
Over a year ago, MasterCard International and Visa U.S.A. developed financial information programs for colleges and high schools.
In partnership with the National Orientation Directors Association, American Express Co. has developed a financial orientation program for college freshmen. These mini-classes on credit management will be conducted in informal college settings, such as clubs. The program will expand in the spring, said Cathy Cummings, an American Express spokeswoman.
"Counseling is obviously out there - I read about it on a national level. But I think I was in denial about what I was doing, hoping that once I graduated I would be able to get a job that would cover my expenses," said Ms. Edison.
"I don't think that anything anyone said would have helped, unless I had concrete examples from a peer on how to survive without a card," she added.
Nancy Socol, director of education for Consumer Credit Counseling Services in Boston, said her office does not keep aggregate statistics on college students. But counselors are seeing graduates who accumulated debt while in college, and they are now in trouble.
"A lot of what I'm concerned about is students who have student loans and then get credit cards while they are in college," Ms. Socol said. "After graduation, their incomes normally don't afford them the ability to pay all of this credit back."
"You don't know what it is like to pay student loan debt or regular debt, until you all of a sudden have these enormous bills every month," said Ms. Edison. "I was only making the minimum payments on my credit card bills. I felt that I should be paying more, but I just couldn't."
A year after graduation, despite a yearly income of $32,000, Ms. Edison is unable to move out on her own.
"It feels bad to be in this kind of situation," she said. "I don't feel as if I'm irresponsible; I don't like to think of myself in that way.
"Now I try to pay as much over the minimum as I can. I still get credit card solicitations, but now I destroy them even if it seems like a good deal."
