While the decline of credit card debt among college students is certainly something to celebrate, it seems misguided for us to attribute this trend to any significant choice on their part. Yet that is precisely what the Chicago Tribune seems to suggest in yesterday’s article, “The Young and the Creditless: Young Adults Eschew Credit Cards.”
As the Tribune reports, only 39 percent of college undergraduates 18 to 24 years old have a credit card, down 10 percent since 2010.
However, the fact is that the Dodd-Frank financial reform act made it harder for young people to qualify for credit cards. Though the law I’m referencing applies to those under 21 years old — for whom credit card qualification now requires a co-signer or proof of sufficient income to pay off the balance — the impact has evidently been strong enough that banks have shifted their on-campus marketing efforts. Credit card marketing on college campuses has fallen dramatically in the wake of Dodd-Frank, while there has been a significant increase in the push for student ID debit cards, financial aid cards, and c0-branded bank accounts. In fact, these products are proving such a boon for banks — and the colleges that partner with them on these products — that the Consumer Financial Protection Bureau (CFPB) has launched a government inquiry into these bank-college relationships.
Of course, plenty of college students 21+ no doubt go out of their way to apply for credit cards minus any aggressive marketing campaign. But in light of the tighter lending standards among banks these days, people of all ages — particularly those with no credit history — are finding it harder to qualify for credit.
What is this inclination to attribute more responsible credit behavior to college students than may be deserved? It inspires hope, I suppose, to believe America has learned its lesson, most ideally embodied in the behavior of the next generation. But only when they’re out in the real world, making real money, will we see just how much more responsible with credit tomorrow’s America may be.