Experts offer advice to prevent financial disaster for freshmen

The college experience presents new and exciting challenges for incoming freshmen each fall semester, but that joy can turn into disaster if poor spending habits cause students to accumulate a substantial credit card debt.

But Southeast Missouri State University financial aid director Karen Walker said the school is trying its best to buck that trend and provide its students with necessary information to prevent a potential financial disaster.

"A lot of surveys have found that there's a big concern about college students who don't have financial skills and are unprepared when they arrive on campus with this newfound freedom," Walker said. "We're doing our best to equip them with what they need so they can avoid getting into trouble financially through all of our programs."

Among the measures Southeast has adopted are a grant program designed to reduce student loan defaults and a website intended to answer students' financial questions.

Awarded in 2007, the Missouri Department of Education's Default Prevention Grant Program helps Southeast and 24 other universities with activities targeted at increasing student success and decreasing the amount of students failing to pay loans. Those activities include one-on-one financial counseling sessions, a telephone hot line to converse with students and tutoring services. About $620,550 will be distributed to grant school for the 2008-2009 school year.

Meanwhile, the web-based Cash Course includes information about budgeting, dealing with debt, scholarships, managing student loans and financing graduate school. The website is cashcourse.org/southeast.

"While we realize some students come in with a lot of knowledge about financial issues, we realize a sizeable population will benefit from our programs," Walker said.

About 2 million students entered college in 2007, a Charles Schwab survey said. The survey found that 41 percent of those freshmen considered themselves knowledgeable on how to budget money, 34 percent knew how to pay bills and 26 percent were aware of how credit card interest and fees work.

"College years are the time when many young adults establish habits that will carry with them for the rest of their lives and, while it's important that they tackle academics, it's critical that they also learn everyday skills — such as how to manage their money — in order to become successful in life," said Michelle Corey, president and chief executive officer of the Better Business Bureau of Eastern Missouri and Southern Illinois. "Aside from leading by example, parents have an active role to play in ensuring their children are equipped to handle their own finances away from home."

To that end, the bureau recommends four rules for new college students.

• Students should to learn credit card responsibility.

Though the card may build credit early on, the bureau said parents should educate students about keeping a minimal amount of credit cards, paying off balances each month and keeping a rein on spending.

• Students should start saving any amount of money they can for the future.

The bureau said that if a student deposits $50 each month into a high-interest savings or money market account that earns 5 percent interest, by graduation he or she will have saved more than $2,660 including dividends.

• Students should pay bills on time.

The U.S. Public Interest Group found that more than 40 percent of students who managed their own credit cards had either paid bills late or had incurred at least one over-the-limit fee. Since that interest accumulates rather quickly, the bureau said the student's credit report could then be tarnished.

• Students should closely guard their personal information.

The bureau said adults between the ages of 18 and 24 were the second-highest age group at risk for fraud. Therefore, the organization said that preventing identity theft could be avoided if documents displaying social security and bank account numbers are shredded. Also, theft could be reduced by keeping a close watch on credit and debit card statements, the organization said.

bblackwell@semissourian.com

335-6611, extension 137