Paper or Plastic?
By Michael Penn MA'97

Another valuable piece of insight could come from a study Gutter has proposed. He is seeking funding for a survey that would analyze students' credit card bills, as well as car payments, bank loans, and other forms of debt. The study may offer some clues to how and why students get into debt trouble, and the results may help the university to target its educational efforts around those findings.

"Many of our students are looking to us for that kind of help," Gutter says. "I would like to think that, as faculty and administrators, we truly are looking out for their best interests."

While there may not be much the university can do to change companies' practices, there has been a recent effort to scrutinize and improve the credit card deals that carry the UW's name. WAA's Bonner recently formed a group of advisers to help design a new credit card program that she hopes will address some of the concerns. "We can't keep credit cards out of students' hands. They have freedoms," she says. "But we can certainly say that the card that is part of campus is going to be set up with very strong terms and regulations."

The tentative plan is to replace the two existing cards with one new program, which would be managed by WAA. Bonner says that she sees an opportunity to use the allure of the combined customer pool as leverage to exact more favorable terms for cardholders, especially students. She and campus advisers have come up with a list of terms that would be included as part of the new deal for students — including requiring lower credit limits, limiting the amount and type of marketing, and insisting on educational programs.

"As well as we could up to this point, we've taken our stewardship role pretty seriously — and we can continue to do even better," Bonner says. WAA has hosted financial management seminars for students in the past, but both Bonner and Nagy agree that there's plenty of room for improvement.

"We expect to see a more refined strategy," says Nagy.

Of some encouragement to the university is the knowledge that, while debt may be expensive for students, it rarely appears to be catastrophic. The default rate among UW-Madison graduates for federally funded Perkins loans, for example, is about 1 percent — the lowest university average in the country. And, although Student Financial Services counsels many students who are having temporary money problems, it's still rare that the university needs to get students outside debt management help.

In most instances, students seem to be waging a bet that they'll soon be earning enough to pay their way out of the debt that they've accumulated. Van Ess says it's hard to fault the confidence students have about their future earnings. "There's this optimism that says, 'Someday I will be making a lot of money,'" he notes. "And I like that optimism."

But with the price of optimism rising, he, like others on campus, thinks it's time for students to check the urge to charge.

Michael Penn MA'97 is senior editor of On Wisconsin Magazine.

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