'How can I keep my son out of debt?'

By Tim Wilmot

QUESTION: My son is leaving for college this fall and I am concerned that he will fall into the credit card trap because he's mishandled money in the past. My husband and I decided he should pay for college on his own so that he develops an appreciation for finances. We are also concerned that he will not manage his student loans properly. What do you suggest I do?

ANSWER: First, this is a very real problem. Years ago, part of the mystique of college was to live with minimal income and possessions. But these days, many college students live better than many working professionals. The reason is that credit card companies are marketing heavily toward college students. As a result, they have the means to purchase almost whatever they want without an income.

An initial area of concern is the amount of student loan money your son will request. It is a good idea to apply for just enough to cover tuition and books. A problem we encounter is students who request loans to cover large amounts of living expenses while in school. The result is that the monthly payment, which seemed like it would never come due while in college, is now due after graduation, and inflated to a point where it is difficult to make ends meet.

Unfortunately, we often see new graduates who are not only struggling with immense student loans, but who also have well over $10,000 in credit card debt. The best way to combat this problem is to teach your children to budget before they leave home. It is a good idea to share information about the family budget so they understand all the expenses that can occur in the future. This lets them know that a budget consists of much more than rent, transportation and utilities.

If it is too late to accomplish that, then share with your son some of the realities about the results of credit card debt that the industry doesn't tell you about. For instance, $7,600 worth of credit card debt at 19% interest can take 41 years to pay off if only the minimum payment is being made. Hopefully, the realization that it can sometimes take decades to pay off debt will ensure a more healthy view towards credit cards.

Another point to stress is the many problems that can happen if debt is not handled properly before graduation. Many students graduate with the idea that they are finally free to start off their life in the real world. With big debt loads, graduates find out that they lost their financial freedom to a few years of free spending at a very early age.

The biggest danger is that debt can easily control the graduate's life. If it is not handled responsibly, the graduate is unable to do all the things he/she dreamed of while in school. Possible implications include not being able to afford to relocate, attend graduate school or even accept a job in a certain field because of pay.

It is also important to teach your children the importance of having good credit. Credit-worthy standing can easily be lost while in college because of problems with leases and unpaid phone bills. It may be nearly impossible in the future for graduates to obtain housing or have a phone if their credit report reflects unpaid rent or phone payments.

Debt problems that begin in college can cause severe problems in relationships later in life. The number one cause of divorce for those age 29 and under is financial. Many of these financial problems are a result of debt that occurred while in college and which continued to spiral out of control after graduation and into marriage.

The key to this process is to teach your children to make sound financial decisions based upon your sound advice. If they rely on commercials, credit card companies and salespeople to make their financial choices, they will fall victim to being controlled by money. Therefore, they must be educated on the many implications of debt.

(Wilmot is a budget counselor with FISC, Green Bay.)

Send questions to Counselor's Corner, c/o Catholic Social Services, P.O. Box 23825, Green Bay 54305-3825. All questions will be answered in print or through the mail. Identities will remain confidential.