Student Credit Cards & Loans

With rising tuition and diminishing financial aid, more and more students are turning to loans to help finance their education.  An average UC student will graduate with tens of thousands of dollars of loan debt.  High loan rates and excessive debt are severely impacting career decisions following college, including whether one can afford to enter public service vocations.  In 2007, national attention was drawn to the scandals involving the private student loan industry and its kickbacks to financial aid officers at public and private campuses across the country.

A parallel concern is the marketing of credit cards on college campuses.  According to student lender Nellie Mae, in 2004 more than 75% of college students nationwide had credit cards, and more than 40% of students had at least four credit cards.  While we support access to credit, students are frequently victimized by the more predatory marketing practices of banks on the campuses (free gifts, higher rates, hidden fees, and so forth).  Students of color in particular are less likely to take out loans and more likely to depend on credit cards to finance their education and living expenses.

Assembly Bill 262

In response our students’ experiences with credit cards, we wrote and sponsored AB 262 (introduced by Assemblymember Joe Coto, D-San Jose).  AB 262 passed the California Legislature and was signed into law by Governor Schwarzenegger in October 2007.

The law prohibits financial institutions from giving gifts (like T-shirts and Frisbees) in exchange for filling out credit card applications.  Equally important, the law requires the disclosure of any arrangements between banks and university officials to market credit cards on campuses.