Guest Blogger Arone Silverman

We previously covered the Sallie Mae report which indicated that student reliance on credit cards has increased dramatically over the past four years. Students are swiping their cards for everything – from course books and laptops to even tuition. An article from the Wall Street Journal indicates almost three quarters of students made ‘risky’ financial moves since last fall. This includes using payday loans to pay off balances, missing credit card payments and maxing out their line of credit.

Credit Card companies are aware of students’ naivety when it comes to credit. Most students don’t know how credit cards work and some even see them as ‘free’ money. While in college students are an easy target. Credit card companies buy lists from schools and enter into exclusive arrangements allowing them on-campus marketing privileges – some even using the school logo on their card.

Some students don't even get to college before the credit card applications start flying through the door.

Jane of Getzville, New York
“Through the bitter experience of an acquaintance, I discovered that parents can be held liable for the debt of children living in their home when they didn't even know and had no way to know that the child had a credit card. The credit card companies market to children and then hold the parents liable.”

Allowing credit card companies direct access to these vulnerable new-credit consumers is dangerous and many students are graduating with unmanageable debt. The Sallie Mae report found that recent graduates leave school with credit card debt equaling $4,138 – a 44% increase since 2004. Combine this high credit card balance with some of the highest rates of unemployment we’ve seen in years, and students are really starting off on the wrong foot.

Legislation passed this week in the Senate and House of Representatives protects students by limiting the availability of credit to young consumers. The bill requires consumers under the age of 21 to either have a parental co-signer on the account or be able to provide financial evidence indicating they can afford to make payments. The bill also includes restrictions on prescreened offers to young people under 21 and prohibits credit increases without approval by the co-signer.